Hershey's (HSY - Get Report) stock price suffered a 15% setback at the end of August after Mondelez's (MDLZ - Get Report) CEO Irene Rosenfeld announced that there was no longer "an actionable path" that would bring the two companies together. The sharp drop returned took the it down to the $95.00 area, where it has been trading in a narrow range around the 200-day moving average for the last month.

Recent price action, however, and the technical indications suggest that the stock may have been punished too severely and could be ready for a potentially volatile move higher.

Click here to see the below chart in a new window.

The daily chart shows the gap and the consolidation around the 200-day average, which has compressed the Bollinger bands to an extreme level.

Periods of very low volatility or tight range contraction are often unwound by a sudden surge in volatility, and in this case, it looks like that move could be higher. The relative strength index has moved out of an oversold condition and is tracking higher, the stochastic oscillator is crossing above its center line, and moving average convergence/divergence made a positive crossover and has been moving in bullish divergence to the horizontal price action.

These underlying metrics reflect initial signs of early positive price momentum during this latest consolidation phase.

Chaikin money flow has crossed above its 21-period signal average and the money flow index, which is designed to identify early shifts in trend, is crossing above its center line.

The narrow range and improving technical indications make the stock a good risk/reward long candidate at its current level, using an initial stop under the channel bottom, and the trading strategy is to book any quick gain from a volatile breakout or take a quick loss if the set-up fails.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.