Sprouts Farmers Market Inc (NASDAQ: SFM)

Sprouts Farmers Market, Inc., through its subsidiaries, is engaged in the retail of natural and organic food in the United States. Its products comprise fresh produce, bulk foods, vitamins and supplements, grocery products, meat and seafood products, deli and bakery products, dairy and dairy alternatives, frozen foods, beer and wine, natural health and body care products, and natural household products. As of February 27, 2013, the company operated in 170 stores in 9 states.

To review Sprouts’ stock, please take a look at the 1-year chart of SFM (Sprouts Farmers Market, Inc.) below with my added notations:

1-year chart of SFM (Sprouts Farmers Market, Inc.)

SFM has been trading sideways for the last 3 months. Over that period of time the stock has formed a clear resistance level at $40 (blue). In addition, the stock has also created a strong level of support at $34 (green). At some point the stock will have to break one of the two levels the rectangle pattern has created.

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The Tale of the Tape: SFM has clear levels of support ($34) and resistance ($40). The possible long positions on the stock would be either on a pullback to $34, or on a breakout above $40. The ideal short opportunities would be on either a break below $34 or on a rally back up to $40.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach

Follow me on Twitter: @cmtstockcoach