NEW YORK (TheStreet) -- Shares of Jack in the Box (JACK - Get Report), after pulling back from this year's all-time highs, have coiled in a pattern that could spring them back up to those historic levels.
Jack in the Box's retreat from its March 2015 highs took out the 50-day moving average before the stock stabilized in May above the $85 level. Shares have moved back up to retest the average as well as a downtrend line drawn off the declining highs since March, in the process forming a triangle pattern. The stock price is tightly compressed between the triangle trend lines, and consequently Bollinger bands are being squeezed, suggesting the potential for a volatile move.
Jack in the Box's relative strength index has crossed above its centerline and moving average convergence/divergence made a bullish crossover earlier in the month and is tracking up toward its centerline. These two indications reflect positive price momentum, particularly over the last three days, in contrast to the broader market's move lower.
The accumulation/distribution line uses more than just cumulative total to measure the flow of money. It takes into account the close within the daily price range to determine if volume was positive or negative, and it is crossing above the 21-day moving average of the indicator that I use as a signal line. Chaikin money flow, directly below it, takes the A/D line and averages it over 20 days, so the two together reflect intermediate and short term positive money flow.
Jack in the Box is a buy after a close in upper candle range that penetrates the triangle downtrend line, with an initial stop under the horizontal support line.