Whole Foods Market, Inc. (WFM) has created a compelling message for traders in the most recent trading. That message has grown stronger as the technical chart setup has developed into a more composite picture for the stock. This is the breakdown as we see it. Many traders ask the question why technical charts should form the foundation of their trading strategy. For them, charts are too complicated, and quite often, unnecessary. But what could be worse than guessing? Technical charts take the guessing out of trading.
The 50 and 200 SMAs for WFM have created a marked trend which is now helping traders to make solid decisions regarding the stock. It’s a trend that is now unmistakable. Based on the trend levels presented by both indicators, the overall sentiment towards WFM is best described as bullish. This trend has created a unified opinion across the trading floor and it is clear that the overall outlook for the stock is now established as positive. But it’s not just the outlook that’s being affected for the stock. Thanks to the consolidated opinion on WFM, activity has also seen a pronounced trend. Under current sentiments the volume activity and subsequent trend has created a strong outlook from buyers and sellers. Of course, when it comes to developing a clear and composite technical picture for a stock, one layer of information can add significantly to previously established layers. It is unsurprising in the case of WFM, that the current trend has created some enthusiasm among traders regarding the stock. In terms of consistency, it is clear that both the 50 and 200 SMAs have done their job in bring traders the overall trend-picture currently being seen for WFM.
There is of course more to the tale than just what the SMAs have presented. For those added details, we can take a look at the Relative strength indicator (RSI) and Stochastic measures, both of which give deeper insights into the overall sentiment of buyers and sellers. SMAs will tell alert you to price direction, but when it comes to judging what buyers and sellers are doing, few indicators are better than RSI and the Stochastic. It as this level of technical data that a trader can determine whether a stock is currently overbought is oversold. The current picture for WFM is of course very telling based on these two additional measures. Based on current readings, WFM’s 14-day RSI is 74.59%. Taken on the standard scale of measurement for RSI, this suggests that WFM is currently overbought and may have peaked, opening the door for a potential price reversal. The stochastic reading offers another solid measure of whether the stock is either overbought, or oversold. In the case of WFM, Stochastic readings gathered over the last 30 days have created a score of 46.56%. This suggests WFM is neither overbought or oversold at prevailing levels.
Forming any judgment on WFM purely through the technicals outlined above, whilst not fatal, may cause some problems. This is because there are other technical factors that help paint the overall picture for the stock. By this point in the analysis of WFM, it is clear that other technical indicators are saying essentially the same things. Specifically the +6.53 has birthed a positive overall sentiment when measured over the previous 30 days or so of trading. Over the longer-term WFM has outperform the S&P 500 by 21.72. This has, unsurprisingly, created lower volatility levels when compared with similar stocks of the same grade and class. Historical volatility is no less consistent. The historical volatility picture for WFM is shown in the reading of 93.97%. WFM has clearly shown its full hand by the overall input of these technical indicators. But there is one final measure that when added to the already rich mix, shows in full color what WFM is doing. The indicator is the Average True Range, and based on the current 3.4 reading, WFM is certainly worth paying attention to.
WFM, like most stocks that presents the current technical picture, should be approached and traded accordingly.
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