On 12 May 2014 I took a look at WFM following the stock’s collapse from the 50s to the 30s for Nancy. I noted at that time that price had broken a significant Support Zone between $40 and $42. That area was tested in July of 2012 and April of 2013 as noted by the ellipses numbered 1 and 2 on the chart above. The break of the Support Zone is noted by number 4. A setup for the move into the Support Zone is numbered 3 as the Exponential Moving Averages all aligned in pointing lower.
Since that post, WFM Dead Cat bounced enough to challenge the 10 Week EMA and the top of the area that was formerly the Support Zone (but is now Resistance). As expected, price ultimately failed and returned to the lows. Arrow Number 5 points out where price is breaking the previous low and preparing to descend further.
Where To Now?
WFM has established a clear trend to the downside. I don’t suggest you short individual stocks, so the only alternatives from my perspective are owning the stock or being on the sidelines. Get some sideline chalk on your shoes. There’s no reason to own the stock unless/until the chart re-establishes a structure with an upside bias. Where should you put your price alert? You shouldn’t even start looking at the stock again unless it can get back up through and close above that same $40 to $42 range.
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