Sprouts Farmers Market, Inc., together with its subsidiaries, operates as a retailer of fresh, natural, and organic food in the United States. The company’s retail stores offer fresh produce, bulk foods, vitamins and supplements, grocery, meat and seafood, deli, bakery, dairy, frozen foods, body care and natural household items, beer and wine, and dairy alternatives.
Take a look at the 1-year chart of Sprouts (NASDAQ: SFM) with the added notations:
After working its way overall lower since March, SFM has ended up bouncing on top of the $20 support (green) several times over the past 3 months. Now that the stock has fallen back down to that support area again, traders should be able to expect some sort of bounce. However, if the $20 support level breaks, lower prices should follow.
Join our new Linkedin Group by clicking the link below:
The Tale of the Tape: SFM has a key area of support at $20. A trader could enter a long position at $20 with a stop placed under the level. If the stock were to break below the support a short position could be entered instead.
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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach