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Whole Foods Enters a Chartist's 'Triangle of Death'

NEW YORK (TheStreet) -- Whole Foods (WFM - Get Report) is proving to be one the worst charts I have seen in a very long time.

What lies before you is something I call the "Triangle of Death," and it's likely lead the high-end food retailer to lower lows.

WFM: One-year Chart

Obviously all of the genius technicians are going to tell me how stupid I am, how could I have missed the obvious head and shoulders top with the neckline at $50.

OK, I got that, but I like my chart better. There is nothing bullish about the price action, any way you draw the lines, especially when you consider the S&P 500 is back near all-time highs.

Whole Foods is one of the few retail stocks down on a day when the SPDR Retail ETF (XRT) (of which WFM is a component) is up nearly 2%.

The two-year chart below offers greater perspective, reinforcing just how important the $50 support level is dating back to the May 2013 breakout to new all-time highs. A break below would put that gap in jeopardy.

WFM: Two-Year Chart

One more chart (that I don't have a name for) is the two-year chart of its 30-day at the money implied volatility (IV). Implied volatility in Whole Foods is reaching a fairly low level despite the stock's weakness.

WFM: Two-year Chart of 30-Day at the Money IV

As a result, premium is relatively cheap in Whole Foods. The April 52.50 put is offered at around 1.45 (with stock at $53.35), which would break-even at $51.05, down about 4.3% A decent structure for someone who thinks the probability of a break below $50 is higher than options market makers currently have it priced.

Dan Nathan is Co-Manager of Action Alerts Options, a regular guest on CNBC's Options Action and Co-Founder and Editor of RiskReversal.com, a service dedicated to equity options education & risk management. 

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