Shares of Jack in the Box (JACK) were trading sharply lower in the premarket (and continues to plummet after the opning bell), breaking a key support level. So, what do investors have to look forward to?
Read Jim Cramer and Jack Moher's analysis of JACK's latest earnings.
In this chart of JACK, above, we can see that prices suffered in the first half of 2015 with a declining On-Balance-Volume (OBV) line. In the second half of 2015, JACK traded sideways, but the 200-day moving average caught up with the price action and rolled over. Sometimes when a stock trades sideways, one can see investors accumulating shares with a rising OBV line, but that was not the case with JACK.
In this longer-term chart of JACK, above, we can see the long rise in the shares of JACK above the rising 40-week moving average, but in the past year JACK broke below the 40-week moving average and the slope has turned down. In the past year, the Moving Average Convergence Divergence (MACD) oscillator generated a liquidate longs signal and a sell signal. The problem with this chart is support, or rather next support.
Reading the chart from right to left (the most recent activity to older price action), we see that the $60 to $50 area is the next support area as it was former resistance on the way up in 2014. This expected support area lasted five or six months, which is pretty good, but it dates back to the first half of 2014 so it is not "fresh" in investors' minds. The key level to watch going forward should be $55. $55 is halfway through the $60 to $50 support area. Forty years ago a wise trader at Commodity Corp. in Princeton, N.J., used to say that if a stock traded more than halfway through a support or resistance area it was likely to go all the way through.
We'll be watching the price action on JACK in the coming days.