NEW YORK ( TheStreet) -- Allstate (ALL) - Get Report has been underperforming other insurance stocks this year, but now it looks ready to break out of a solid basing pattern and catch up to its peer group.
The Dow Jones U.S. Select Insurance Index has been in a primary uptrend for the last three years, and during most of that time, Allstate has outperformed the index. That dynamic changed about 10 months ago, and the stock began to underperform. Over the last six months, the stock is a 14% laggard relative to the broader sector.
The daily chart shows the consolidation that began about three months ago and resembles an inverse head-and-shoulders pattern below $68.50 neckline resistance. The complex left shoulder developed over the May and June period, and the head marked the July low, with the right shoulder forming above the 50-day moving average.
Moving average convergence/divergence can be seen making a higher low earlier this month in bullish divergence to the stock price, and now it's moving above its centerline.
The relative-strength index is tracking above its centerline, reflecting the recent positive price momentum, and Chaikin money flow, which measures money flow relative to closing price within the daily range, is crossing above its centerline into positive territory.
The inverse head-and-shoulders pattern projects a price target measured by the height of formation, added to the neckline. A successful breakout projects to new highs in the stock. Allstate is long candidate after a close in upper candle range that takes out the pattern neckline, using a trailing percentage stop.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stock mentioned.