United Natural Foods

Mid-cap organic and specialty food distributor United Natural Foods ( UNFI) has been all over the place in the last year. But zoom out a bit, and a clearer picture starts forming. You probably guessed: It's not a good one.

UNFI is currently forming a head and shoulders top, a price pattern that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head. The sell signal comes on the breakdown below the pattern's "neckline" level at $51. A shallow downtrend in RSI over the whole course of the pattern adds some extra bearish confirmation to a breakdown below UNFI's $51 support level.

As a trader, it's critical to have a contingency plan. That means: When does this bearish setup break? If UNFI can push through the top of its shoulder level at $56 (the red dashed line), we've got a good sign that more buyers have stepped in to buoy shares. Until then, $51 is our sell signal.

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