Here’s your trade on Sprouts Farmers Market (SFM) (January 11, 2016)
SP-500 SPY AA SP-500 SSEC-X USX--X T2100 T2118 SP-500 XOIL.X DJ-30 MCD V DJ-20 COMPQX RAI PM RAI UA NKE LULU M WMT ROST LOW HD SBUX STZ PLAY HACK PANW FEYE CYBR SWHC PSA IBB LGND LOW RAI CELG
I want to go through Sprouts Farmers Market ( NASDAQ:SFM ) today, and this is why: I think this stock is setting up for a good buying opportunity. If the stock pulls back to the 50-day moving average. AND shows signs of bouncing, I think that’s your entry. Now, lets look at this a little more closely, it doesn’t take too long. The DOWNSIDE, the fly in the ointment in that, that smell of fish in the back of the car (Grumpy Old Men), is this big, massive volume spike on a volatile day. I would have to say that’s institutional selling; you just don’t get a stock trading 11 million if funds aren’t selling. So what I want you to do is this: watch and see how the stock acts at the 50-day moving average and REALLY only be long.
If you’re buying it really, really tight here and then it rebounds, that’s fine. But that’s a really, really precise trade and that plan would be based on the stock doing something very, very specific. In other words you could say, “Oh, I’m going to do exactly this.” Well that’s fine, but if the stupid stock doesn’t cooperate with you then the best plan in the world, unexecuted, is just an unexecuted plan, and doesn’t make you any money. I would say you go ahead and take that trade if it presents itself. But what you really want to be doing is, watching for this stock, and this is not going to happen tomorrow, but watch for the stock to REGAIN the 200-day moving average. Because right now all you’re seeing is a bunch of trading right around this 200-day moving average.
In a couple weeks you’ll see this bullish crossover, and everybody will be all lathered up about this, and that’s great. I just want you to WAIT until this stock is trading up above there. Why do I want you to do that? Because there’s a chance that the stock WON’T trade up above there and then you’ll be glad that you waited, that you DIDN’T buy the stock. And if the stock does in fact trade up above there, you can look back and say, “Well Dan, I could have bought it at a lower price,” and you would be correct, you could have bought it at a lower price. But what you did was you sacrificed cost basis in favor of risk management. And in my view most of the time that’s a pretty good trade-off. Sometimes it’s not, but in this case I think it is. Also, on a related note, Whole Foods ( NASDAQ:WFM ), same industry, is also coming back to a buy point, but this is really chopping around. With Sprouts ( NASDAQ:SFM ), it’s really just kind of in an uptrend and we’re looking for an entry.
Free Chart