NEW YORK (TheStreet) -- Natural foods supermarket chain Whole Foods Market (WFM) is set to report third-quarter earnings after the closing bell on Wednesday. These "must see" charts show that investors should be prepared for a positive reaction to earnings, as the stock returns to its glory days of having strong upward trading momentum.
A year ago, on Oct. 28, 2013, Whole Foods set an all-time intraday high at $65.59 and was up 30% year to date in 2013. Then the company released its third-quarter 2013 earnings on Nov. 6. A miss on revenue ended the momentum run for the retailer of Nature's Best foods, and set-up a poor year in 2014.
The stock stair-stepped lower following earnings releases on Feb. 12 and May 6 and the stock traded as low as $36.08 on July 17, down a painful 45% for "buy and hold" investors. The stock has been moving sideways since then.
Analysts expect Whole Foods to report earnings per share of 32 cents after the closing bell on Wednesday. The daily chart below shows the extreme up and down volatility over the last two years. This is followed by the weekly chart, which shows the possibility of a positive post-earnings reaction.
Investors should consider using a "good 'til canceled" limit order to buy weakness to the 50-day simple moving average at $38.28 and add to that position at the July 17 low at $36.08. The upside is to the 200-week simple moving average at $43.02 and to the 200-day simple moving average at $43.44.
Here's the daily chart for Whole Foods Market.
Courtesy of MetaStock Xenith
The daily chart for Whole Foods shows the volatility for the stock over the last two years. The stock's momentum run began when the stock popped above its 200-day simple moving average (green line) on May 7, 2013, in a positive reaction to earnings. The momentum run took the stock to its all-time intraday high at $65.59 on Oct. 28, 2013. The stock has been sliding downhill since then, with the 50-day SMA (blue line) declining below its 200-day SMA on Feb. 5 in what market technicians call a "death cross". The stock has been trading back and forth around its 50-day SMA at $38.28 since July 30.
Here's the weekly chart for Whole Foods Market.
Courtesy of MetaStock Xenith
The weekly chart for Whole Foods ($39.80) shows that the stock has been above its 200-week simple moving average (green line) since Feb. 19, 2010, when this average was $17.43. The stock has been below its 200-week SMA since May 9. The momentum run to the all-time high totaled 276%.
Looking at the right side of the graph, you can see the technical reason for optimism following the earnings report released after the closing bell on Wednesday. A weekly close above a key moving average at $38.49 shifts the weekly chart to positive as the momentum reading, in red along the bottom of the chart, is rising above $20, at $46.07.
Therefore, the daily and weekly charts show that investors can manage the stock's volatility. The charts also justify being long the stock.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.