This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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

NEW YORK (TheStreet) -- Whole Foods (WFM) 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. 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,563.30 -317.06 -1.88%
S&P 500 1,930.67 -39.40 -2.00%
NASDAQ 4,369.7730 -93.1290 -2.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs