Daily Bull Chart: Papa John's

 | Jun 09, 2015 | 12:30 PM EDT
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I like Papa John's (PZZA). No, I'm not talking about the pizza, although I like that too, but PZZA stock. The stock is setting up buy triggers on both the daily and the weekly charts, with the triggers coming from different patterns.

Papa John's (PZZA) Daily Chart
Source: StockCharts.com

After a strong run in May, Papa John's has pulled back in a steep flag pattern to start June. The stock broke out in strong fashion on Friday with confirmation coming yesterday in the form of follow through. This has created a "party hat" pattern on the long- and short-term parabolic stop and reverse (PSAR) indicators. This pattern occurs when both the short- and long-term PSARs are bullish one day, flip to bearish the next day and back to bullish the day after. This creates an arrow pointing higher, although I see it more like one of those pointy hats you used to get as a kid at your friend's birthday party.

There is also a strong relative strength index (RSI) on the daily chart along with a recent bullish crossover in the slow stochastics. The target on the daily chart points to $75 over the next four to six weeks.

 

Papa John's (PZZA) Weekly Chart
Source: StockCharts.com

 

The weekly chart is the real strength here. Glancing all the way back into late 2012, there is a very clear cup-and-handle pattern on PZZA. Admittedly, this chart tests the "permitted" depths of a cup as it is right up against the maximum generally seen as allowed for the pattern to be referred to as a cup and handle. It also presses the limits as far as the time it took for the cup to form. Still, I find the pattern itself appealing. The move higher before the cup is clear. The cup is clear. The handle is clear. And now the breakout higher from the handle is clear.

The weekly chart targets $80, above the $75 target on the daily; however, the timing on the target is longer. This is setting up more like six to nine months. Support should be in place between $65 and $67, but under no circumstances would I want to be long under $60 here. A move of that magnitude sets up the stock to plunge into the cup.

I'm drawn to this, particularly over many other weekly charts, because the pattern is much different from what we see on the major indices.

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