The last time we we reviewed Williams-Sonoma, Inc. (WSM) around the middle of March, we wrote that, "It looks like WSM wants to break out of its base pattern and rally but some risk remains. Traders should only buy strength above $57 as new highs tell us that the trend is up. A reversal back below $52 would suggest that the strength this month is not enough to move the needle on WSM."
Well, WSM first declined below $52 to $47 by May but early this month it rocketed above $57. Traders should be long WSM with a profit now so let's look at some price targets this morning on Williams-Sonoma, whose CEO Jim Cramer interviewed last night on Mad Money.
In the daily bar chart of WSM, below, we can see that the actual upside breakout began in terms of price at the end of May. Prices gapped above the bottoming 50-day moving average line and the rising 200-day line. The volume of trading surged toward 15 million shares and prices kept rising. WSM finally made a small consolidation pattern this month before pushing up to new highs again.
That was the price action but the real breakout began in February if you look at the On-Balance-Volume (OBV) line. The OBV line began to rise in February telling us that buyers of WSM were being more aggressive with heavier volume being traded on days when the stock closed higher. Prices declined from the middle of March to late May but the OBV line was rock solid telling us that selling pressure was very light and buyers stayed put.
In the lower panel is the Moving Average Convergence Divergence (MACD) oscillator, which gave a cover shorts buy signal in April and an outright go long signal as it moved above the zero line in late May.
In this updated weekly bar chart of WSM, below, we can see the upside breakout from the base pattern. Prices are above the rising 40-week moving average line and the weekly OBV line is super strong. The MACD oscillator on this longer time frame is also bullish.
In this Point and Figure chart of WSM, below, you can see most of the base pattern and you can clearly see the upside breakout without the gap. A potential price target or objective of $74 is indicated.
Bottom line: If you brought WSM on the breakout above $57, hold and raise sell stops to your entry price. Our price target is $74. Shallow dips could be used to add to your initial position.