Action Alerts Plus holding WhiteWave Foods (WWAV) has been moving sideways for two months, and our momentum study suggests that prices should try the upside soon.
WWAV is still trying to bottom and has been finding support around $40 for two months (see chart above). While the 50-day moving average is still pointed down, we can see a clear bullish divergence between the price action making equal lows at $40 and the improving momentum study making higher lows. Technical analysis is not infallible, so have a plan to exit WWAV if it breaks support (exchanges are eliminating stop orders).
Nov. 19, 2015 | 3:35 PM
WellCare Health Plans Continues to Face Downside Pressure
- The most likely downside targets are previous support levels at $70 and $60.
While some parts of the equity market have rallied from their August lows into the fourth quarter, WellCare Health Plans (WCG) has been under downside pressure.
In this chart of WCG, above, we can see that key support for several months has developed around $75, sometimes a tad above or below that level. Rallies have petered out in the $95 area and sometimes around $90. This is a toppy looking chart. The On-Balance-Volume (OBV) line turned down in early September, suggesting that liquidation has picked up and the Moving Average Convergence Divergence (MACD) oscillator is bearish.
In this longer-term chart of WCG, above, we can see prices are below the 40-week moving average and the slope of the average is turning negative. The OBV line is pointed lower and the MACD oscillator is weak. The most likely downside targets are previous support levels at $70 and $60.
Nov. 19, 2015 | 3:15 PM
Williams-Sonoma Sets the Table for Further Declines
- A logical target for WSM is $60.
Schumpeter's idea of creative destruction is still playing out. Traditional bricks-and-mortar stores are getting hit with a competitive disadvantage, as well as margin and profit pressures. These issues are showing up in the charts of companies such as Williams-Sonoma (WSM).
In this chart of WSM, above, we can see a bullish pattern until August, when WSM broke down below its 50-day and 200-day moving averages. The two averages gave a death, or dead, cross in October, with the 50-day going below the 200-day average. The On-Balance-Volume (OBV) line is bearish, as is the Moving Average Convergence Divergence (MACD) oscillator. WSM has chart support in the $65 to $62 area and prices are oversold and could bounce up towards $70 before renewed selling develops.
In this longer-term chart of WSM, above, we can see the break of the three-year uptrend. Prices are breaking below the 40-week moving average and the slope of that key average is turning down. The OBV line and the MACD oscillator are bearish in this timeframe. A logical target for WSM looks like $60, but we might have an oversold bounce before reaching that objective.
Nov. 19, 2015 | 2:15 PM
Chipotle Is Cooking With the Right Ingredients; Short-Term Outlook is Positive
- Traders could nibble at the long side using a sell-stop below the recent lows.
There are a few guidelines to keep in mind when using technical analysis. First, it probably works best in conjunction with another approach like fundamentals or quantitative techniques. Second, it is more of a wind sock than a crystal ball in that it can't be expected to call every turn. Third, experience and art count. Technical analysis is more than just science. Or, support is a zone or an area rather than a horizontal line in the sand. Keep that in mind as we look at Chipotle Mexican Grill (CMG).
Looking at this chart of CMG, above, I see a couple of things to emphasize. On the bear side, the price of CMG is below the 20-day moving average and it broke support in the $620 to $600 area. On the positive side, CMG is generating an oversold buy signal from the slow stochastic, and we can see a bullish divergence between the price action making lower lows and the momentum study making a higher low.
This longer view of CMG is interesting. The price chart shows what could be a broadening pattern, or an inverted triangle (see my book "Chart Patterns" for more on this) over the past 18 months. This pattern has wider and wider price swings, so the breaking of support and resistance areas is expected as the pattern forms. The lower panels show a weekly oversold buy signal and the On-Balance-Volume line is holding above its last low, even while prices made lower lows.
Putting the short-term and longer-term pictures together, we have a positive short-term outlook for CMG. Traders could nibble at the long side using a sell-stop below the recent lows.
Nov. 19, 2015 | 1:30 PM
Energy Transfer Partners Could Rally Back to $50
- The heavier volume of trading in recent months suggests that the weak holders have been flushed out.
Shares of Action Alerts PLUS holding Energy Transfer Partners (ETP) have nearly been cut in half. Is it finally ready to rally?
ETP (see the chart above) is still below the falling 50-day and 200-day moving averages. However, we can see a nice bullish divergence between the equal price lows in September and November and the higher lows seen from the momentum study. The On-Balance-Volume (OBV) line is trying to base and that could happen soon with a short string of higher closes.
The chart above shows a big decline in ETP. Note the heavier volume of trading in recent months, which may suggest that the weak holders have been flushed out. Also notice the bullish divergence on this timeframe -- we have lower lows in prices, but in the bottom panel we have equal lows from the momentum study. This bullish divergence could be foreshadowing a rally for ETP back into the $45 to $50 area. A close above the October highs will be a welcomed development.