Here’s the lowdown on Sprouts Farmers Markets (SFM). Look at the intraday chart for the daily ac..
Discussed in this article: Sprouts Farmers Market Inc. ( $SFM )
I want to look at Sprouts Farmers Market ( NASDAQ:SFM ). I have talked about this a few different times. My suggestion was, if you remember back here, when the stock printed this big high spike and then it moved lower, closed down, not at the low of the day, but we’ll say like in the lower quarter of the day.
It looked like that could be a little bit of a climax; at least you had to watch it as such. You never want to discount too much when the stock still closes well above were it did the day before, you can’t get too bearish on it.
My suggestion has been that we look at the intraday lows as the line in the sand. This is the last time, other than this one here, that we just got today, this the last time we had a lower intraday low from this, and it was only barely. After that, every single time, as this stock has been moving higher, the intraday low has also been moving higher.
So my suggestion was, and I don’t think it’s a novel concept, it should just be what you do when you have knowledge of price action. When a stock is screaming like this, well it’s not really screaming, but let’s just say it’s kind of zooming up a little bit; when it’s moving up like this and you want to stay long as long as possible, what you can do is key off of the intraday lows.
With each candle that’s formed you look at the intraday low and you say, “Okay, that’s my stop.” If you’ve done it here you’re not going to get stopped out, here, not going to get stopped out, you know the rest. So you’re not going to get stopped out. This would have been the first time today that you would get stopped out, the intraday low is 44.52; So about 30 cents higher than this stock is now; not that big a deal at all.
If we look at the 5-minute chart you can see what happened. The first thing in the morning the stock gaps up a little bit, then runs, and then it pretty much proceeds to sell off the rest of the day. If you are a short-term trader, and I’m talking like a day trader or swing trader, here’s where you start; you start with this and you see that it’s kind of getting extended and you’re at least on the alert for a pullback.
So there’s not that much data in the daily chart, it hasn’t been trading that long, so then when you go to the 5-minute chart you’re really going to get a good sense, right at the open, when the stock peaks, starts coming back, there’s that prior support level, you’ll note that volume is a little bit heavier.
Again, these are 5-minute bars and volume is always going to be heaviest first thing in the morning, because that’s when most of the training takes place. But you’ll see that the stock closed on support and then once it started to trickle down here you needed to get out of this stock.
So you get out in the mid 45’s, 45.25, 45.30 whatever it was; and then you’re done, you’re out of this stock, that’s all she wrote, there’s nothing to do like, “Okay, well now I’ll get back in, I’m going to short this stock.” You could, I guess you could, but the whole day the stocks only traded 316,000 shares. Do you really want to short a stock that only trades 316 a day? I don’t?
What you want to do now is stay away from the stock, let it run its course. It’s still in this IPO configuration that I talk about, where the stock finally clears this initial high, this initial peak, that it makes. So it finally clears; I’m looking at possible support let’s say right around this level, maybe a little bit lower. Wait till Sprouts Farmers Market ( NASDAQ:SFM ) closes lower a few days, let this thing run its course, and then you can go ahead and buy it.
But if you’ve been long this all the way up, if you have a longer time horizon, then that’s fine. But if you’re a short-term trader this is your signal to liquidate your position. It might sound a little bit counterintuitive, but then the time you reinitiate that position, in the next couple days, if it doesn’t continue falling is when the stock runs to a new high. So yes, I know you sold low and bought high, but what this is doing is the trend is reasserting itself and showing you, yes, the stock is still under buying pressure.
So that would be one trade, a breakout to new highs, you’re back in. The other one is, a deeper pullback and then at the first sign of buying, where you get at support level, that’s when you can buy too. So you’ve really got two trades here on Sprouts ( NASDAQ:SFM ), but it really started with seeing this series of higher lows, and then zooming in on the intraday chart to see how its trading during the first 5, 10, 15-minutes of trading in the morning.