Shares on Dunkin' Brands (DNKN) - Get Dunkin' Brands Group, Inc. Report have been trading lower in a descending channel for the last three months, but with a successful retest of channel support last month and a nearly 3% rally in Monday's session, they have moved above pattern resistance. The recent price action and the technical indicators are suggesting that there may be a shift underway in the direction of the intermediate term trend, which could help return it to the highs it saw earlier in the year.
The daily chart shows the steady series of lower highs and lower lows that have defined the a $4 channel range. Last month's latest low was a 62% Fibonacci retracement of this year's current range and was followed by a sharp bounce that continued this month, taking price back up to the top end of the channel. The relative strength index and moving average convergence/divergence have crossed above their center lines, and the aroon indicator, which is designed to identify early shifts in trend, has made a bullish crossover. The money flow indications are also improving, with Chaikin money flow advancing into positive territory and the money flow index, a volume-weighted relative strength measure, crossing above its 21-period average and nearing its center line level.
The stock rallied nearly 3% in Monday's session, taking out channel resistance and closing above $45.75, which is also the 50% retracement level of the 2015 and 2016 range. It is a long candidate at its current level using an initial stop under the 50-day moving average. The pattern price target is measured by adding the height of the channel to the breakout level, and it projects back up to the $49 area.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.