Specialty grocer The Fresh Market (TFM) was spurred last week by a better-than-expected second-quarter earnings report in which it also reaffirmed its outlook. TFM stock now has some pep back in its step, and that means opportunity for active investors and traders.
Fresh Market earned 36 cents per share last quarter, 13% better year-over-year and a penny better than what the Street thought was coming. Meanwhile, revenues grew 19% to $422.2 million, also beating analysts’ calls for $411.9 million.
On the back of the results, BB&T Capital upgraded Fresh Market to a “buy” rating and set a $41 price target for TFM stock. However, Morgan Stanley kept its “underweight” rating and the $30 price target. And on Thursday, Wedbush initiated coverage on TFM stock with a “neutral” rating and a price target of $34.
In other words, as usual, the analyst community is all over the place with its estimates and expectations … which is why we so often turn to price action for some real clues.
TFM Stock Charts
Shares of The Fresh Market, which have only been publicly traded since November 2010, have seen plenty of action in this relatively short time and also have reacted well to their various technical support and resistance levels.
On the weekly chart, note that after a steep incline in 2012, TFM stock finally ran out of steam by autumn and began a steep decline, which in August 2013 was met with a crucial lower high. The stock then resumed its slide, and by February of this year had worked its way all the way back to IPO levels, which is where momentum (as represented by the RSI index) bottomed — this is shown in the lower part of the chart.
Price eventually pierced below IPO levels in May and again in July/August, which was met with a higher low in momentum, thus flashing the all-important and bullish positive divergence signal that I often discuss.
On the daily chart, note that even though price again broke below the IPO lows in July/August, price did score a marginally higher low vs. the absolute lows in May. The stock then rallied about 8% on a breakaway gap after the earnings report on Aug. 22, which put TFM stock back into better upside momentum.
In the meantime, The Fresh Market has worked its way back to a diagonal resistance line dating back to late 2013, which also is fairly close to its 200-day simple moving average (red line) — a mark that the stock hasn’t traded above since last November.
TFM stock thus has near-term resistance around the $35-$35.50 area, but if and when this level is overcome (which, given the bigger picture strength it should be able to do), the stock could open up for a move toward the $40 area — nearly 20% higher from here.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.