DataTrader: Whole Foods Market’s Big Markdown
When shares of Whole Foods Market (WFM) rallied to a new, year-to-date highs back in mid-September, traders and active investors celebrated by ringing the register early and often. The stock closed lower the very next day and continued lower for another two sessions. A subsequent rally just a few days later was met by even more aggressive profit-taking, as shares of WFM tumbled for five days in a row.
So should traders be surprised to see another round of profit-taking on Tuesday, shortly after WFM climbed to a new, year-to-date high?
We didn’t think so, either.
The pullback of more than 5% in WFM erased four days worth of gains, but has not yet returned the stock to oversold levels above the 200-day. Recall that it is at these levels where stocks have historically been able to find buyers in the short term, often turning sudden sell-offs into buying opportunities for alert traders. And should WMF continue to retreat, as it after some of the other recent rallies noted above, then the likelihood of both an oversold close and strong buying in response would be great.
As such, even though Whole Foods Market has some of the largest edges in our database of stocks – particularly among those stocks trading in bull market territory – the bigger rewards may await traders who are patient enough for the stock to continue to “come in” and truly begin showing signs of panic selling. Another day or two of the same kind of trading action we saw on Tuesday would be more than enough.
Quantified data and research on stocks like WFM is available each evening after the market close. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com