Unfortunately, the area near the August and September lows may not be able to hold again this month. With overhead pressure building a fresh down leg seems likely. For Williams-Sonoma investors, much lower entry levels may be on the horizon.
Since the Aug. 24 flush, Williams-Sonoma has remained in a very narrow range. The stock did manage a slight rebound, but the upside of this move has been road blocked by the stock's 200-day moving average. The 200-day capped the September high and appears set to cap October's as well.
While Williams-Sonoma has been bumping its head on this key long-term indicator, the 50-day moving average has been bearing down. Just as the stock is desperately trying to hold key support between $73 and $74, the 50-day is crossing below the 200-day. This bear cross often casts an ugly shadow.
If Williams-Sonoma is unable to hold the key support zone near the August/September lows, a new down leg will likely begin. With the daily moving average convergence/divergence crossing into negative territory as well, a pickup in selling pressure could accompany new lows.
For patient Williams-Sonoma investors, a stand-aside plan may prove wise. A very solid layer of support sits just below $70. A powerful breakout gap is in this area as well as last September's highs. A retest of this area would provide a low-risk entry opportunity will develop. As the stock dips below $70, it will return to oversold territory and will be primed for a new base.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.