Shares of organic foods supermarkets operator Whole Foods Market, Inc. (NASDAQ:WFM) were once a hot ticket on Wall Street. But in 2015, WFM stock is off a lousy 40% as a result of stiffer competition, among other things.
As a result, sentiment in Whole Foods shares are beaten down and expectations are low … but technically, WFM stock is reaching a bigger-picture support area where a moderate bounce might come to fruition.
Active investors and traders need to sit up and take notice: WFM is showing signs of exhaustion on the downside.
It wasn’t that long ago (the second half of 2013) when investors were falling over each other to snap up shares of Whole Foods stock and analysts had sky-high estimates on the company’s growth prospects. Of course, the point of maximum giddiness and optimism is also when things tend to top out and all the bulls are up to their chins in stock.
Case in point: WFM stock, which has been in a severe downtrend since late 2013 with no real signs of abatement just yet.
WFM Stock Charts
Looking at the longer-term picture of WFM stock, we note that a) the stock is no stranger to volatility, as it has seen more swings than a playground over the past decade or so, and b) that thus far, the nasty drip off the 2013 highs actually still qualifies as a mean-reversion move.
Whole Foods’ major bull leg from late 2008 into the late 2013 highs saw it appreciate about 1750%. The drop since has measured about 55% and is not unusual in this time frame if we consider the severity of the rally and the steepness of the stock’s slope. From a Fibonacci perspective, the stock is nearing the 61.8% retracement of the entire 2008-13 rally, and WFM stock is also increasingly looking exhausted from the nonstop selling spree since February.
On the daily chart, we see that in early November following the company’s latest earnings report, Whole Foods stock dipped below its August lows. The low on Nov. 5, however, quickly saw WFM bounce back, and the stock has since had two more unsuccessful attempts at retesting those lows (or, in other words, the early November lows are holding).
Over the past few trading days, WFM has managed to push back above its 8- and 21-day moving averages and marginally back above previous support, as represented by the black horizontal. From a momentum perspective the RSI oscillator bottomed in late August and has been showing relative strength versus price ever since.
Active investors and traders could look to nibble on WFM stock at current levels for a move back into the mid-$30s, while respecting any significant bearish reversal and a last-resort stop at the early November lows.
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