Tread Lightly on Whole Foods

 | Aug 13, 2014 | 9:00 AM EDT
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Given the healthy downside correction we have seen in Whole Foods Market (WFM) since November 2013, we have to wonder if the stock is worth looking at on the buy side again. When I see such a move, I typically have to back up and take a look at the bigger picture, and that means I look at a weekly chart of the stock. 

I found two things on this chart. I found a Fibonacci price cluster of support at the $33.52-$35.98 area, which comes from the coincidence of at least eight Fibonacci price relationships. These include retracements, extensions and projections of prior declining swings. If price continues to hold above here, we could see the resumption of the rally in this stock. Besides finding the key support decision we are seeing the current bounce from, I'm also identifying the area of resistance that Whole Foods' stock really needs to clear if the recent bounce from support is really more than just a corrective rally before resuming the decline. This zone comes in at the $40.29-$42.18 area.

The most important part of the resistance calculations comes from taking 100% of the prior rally swings and then projecting those from the July low.

Next I looked at the daily chart.

On the daily chart I found a couple things. First, I did find that there were Fibonacci timing cycles evident at the most recent low, so I know that low should be considered key and pivotal. I also see a very short-term decision I would ideally like to see WFM hold above if that last low is any good. This support comes in at $37.14.

Now I can't tell you I'm convinced just yet that we have a more important low in place in WFM. For that, I really need to see more bullish price action, and most of all I want to see a rally swing off a low that is larger than the prior corrective rally swings we've seen in the past. The first real good indication would be a rally beyond the daily resistance at the $40.29-$41.93 area, along with taking out the prior swing high on the daily chart at $42.90.

Until then, tread lightly on the long side of Whole Foods!

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