Sprouts Farmers Market (SFM) broke a downtrend last month and a made a nice "first leg," but can the rally continue and build from here or will the buying dry up?
Let's get our hands dirty with the latest organic charts and indicators.
In this daily bar chart of SFM, above, we can see prices broke a multimonth downtrend last month. Prices rallied quickly and sharply above the 50-day moving average line and the 200-day moving average line. This price strength has turned the slope of the 50-day moving average line positive and is turning the flat 200-day moving average line. The daily On-Balance-Volume (OBV) line jumped sharply with heavy volume in March but has moved sideways as prices have consolidated the past two weeks. The MACD oscillator moved above the zero line in March for an outright go-long signal but the two averages of the indicator just crossed for a take-profits sell signal.
In this weekly chart of SFM, above, we can see how prices rallied to close above the 40-week moving average line. The weekly OBV line shows some recent improvement and the weekly MACD oscillator gave a cover-shorts buy signal last month and could soon cross above the zero line for an outright go-long signal.
In this Point and Figure chart of SFM, above, we can see a longer-term downtrend is still in place. If the rally continues, the $33 area is a possible price target using this kind of chart.
Bottom line: SFM never retested its March price low and that makes me a little nervous about going long. I would like to see SFM make a higher low on the chart before joining the bull case.