Should You Scale Into Weight Watchers Amid Oprah Winfrey Presidential Fever?

 | Jan 10, 2018 | 9:00 AM EST
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Imagine a candidate for the U.S. Presidency doubling as the spokesperson for a product. The presidential candidate would be surrounded by a phalanx of reporters at all times, and the resulting press coverage would guarantee the company near-continuous mentions in print and on TV. It's the kind of publicity that money can't buy.

It would also be the kind of publicity that Weight Watchers International (WTW) would receive if its spokesperson, Oprah Winfrey, becomes the Democratic nominee for President in 2020. After Ms. Winfrey, who is also on the Weight Watchers' board of directors, gave a short speech during the Golden Globe Awards on Sunday evening, the hashtag #Oprah2020 began trending on Twitter (TWTR) .

While Ms. Winfrey hasn't expressed any desire to run for office, she's receiving plenty of encouragement from her fellow celebrities. Meanwhile, owners of Weight Watchers stock watched their accounts put on weight as the stock jumped to a four-year high.

On Monday, the stock shot 5.71% higher to break out of a five-month rectangular consolidation (shaded yellow). It's the third attempted breakout from this rectangle after two prior failures, so it'll be interesting to see if the third time is the charm. The pattern gives Weight Watchers a price target of $58. (On Tuesday, WTW surged another 9.0% to $57.37.)

Source: TradeStation

What about the competition? While Weight Watchers is making a strong move, competitor Nutrisystem Inc. (NTRI) is beginning to look tired. After breaking out to multi-year highs in February of last year, Nutrisystem has formed a bearish head-and-shoulders pattern (semicircles). The neckline of that pattern is near the $45 area (dotted line), which would be considered major support for the stock.

While the bearish pattern has been taking shape, Nutrisystem's MACD (moving average convergence divergence) indicator has been forming a series of lower highs (LH). This indicates that a break to the downside is likely. The stock's MACD flashed a sell signal on Jan. 4 (red arrow).

Source: TradeStation

One name in this space that is flexing its muscle is Planet Fitness (PLNT) . Planet Fitness is in a strong uptrend, as evidenced by the growing chasm between the stock's 50-day moving average (blue) and its 200-day moving average (red).

Despite this stock's strength, a recent pullback has brought its RSI (relative strength index) indicator down from overbought levels (red) to neutral territory (green arrow). Since the stock is no longer overbought, Planet Fitness could be an interesting pickup at its current price.

Source: TradeStation

Ed Ponsi is a regular contributor to Real Money Pro our site for active traders. Click here to get more great columns like this from Ed Ponsi, Paul Price, Doug Kass and many more.

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