A Technical Look At Weight Watchers: Support At Last?

Weight Watchers International, Inc. WTW is down more than 50 percent from its June high, and spokesperson and investor Oprah Winfrey has taken some of the heat for the decline.

A Winfrey spokesperson denied last week’s New York Post report that Oprah may be dialing back her role at Weight Watchers, but there’s no question the stock is in a tough technical spot with or without Oprah on board.

On Monday, Weight Watchers announced actress Kate Hudson would be joining Winfrey as a global company spokesperson, but the announcement didn’t seem to move the stock. Weight Watchers shares were down another 3 percent, and the technical picture isn’t looking great at this point. At time of publication, the stock traded around $46.24 per share.

Support At Last?

Weight Watchers stock hit its all-time high of $105.73 in June, but it has been downhill ever since. The stock broke below its 50-day simple moving average in July, below its May high of $83.98 in August, below its 200-day SMA in September and down to new 52-week lows in November following a disappointing earnings report.

Fortunately for Weight Watchers bulls, the stock seems to have found some support at around $45, a strong historical support level. Weight Watchers spent roughly the entire second half of 2017 trading between $40 and $50 before breaking out to new highs in January.

So far, the $45 support level has held up. The stock has traded mostly sideways for the past six weeks or so, but it will be facing some bearish technical pressure headed into 2019. The stock experienced a death cross of the 50-day and 200-day SMAs back in October. The stock’s 50-SMA has held as resistance since the beginning of August, and the stock has been unable to break above that 50-day moving average despite three tests.

Levels To Watch

The 50-day SMA stands at $55.96, but it’s falling fast. At this rate, horizontal support between $40 and $45 will converge with the resistance of the 50-day SMA likely sometime in late January. If the stock doesn’t make a definitive move higher or lower in the meantime, the convergence will force a breakout in one direction or the other.

Below $40, the stock likely wouldn’t find support until either the August 2017 low of around $32 or the February 2017 high of around $20. Above the 50-day SMA, the next potential resistance level would likely be the October pre-earnings low of around $62.

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