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. 

More from Opinion

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

Musk Goes on Unoriginal Media Tirade

Musk Goes on Unoriginal Media Tirade

What's Happening in Video Games This Week: On the Road to E3

What's Happening in Video Games This Week: On the Road to E3