All Weight Loss Programs Are Not Alike!

01/28/2013 7:00 am EST

Focus: STOCKS

It’s time to deliver on the New Year’s resolution you made at the beginning of the year, and Greg Harmon of Dragonfly Capital provides ideas that can help you lose weight and not money.

Sounds like a commercial right? January is the time to go the gym, sign up for a membership you will never use and then go on a diet. Two major competitors do all that they can to get your weight loss business, Weight Watchers (WTW) and NutriSystems (NTRI) and many will think it does not matter which one you use. That may be true but it does matter which stock you might pick to trade. Take a look.

Weight Watchers (WTW)

chart
Click to Enlarge

Weight Watchers (WTW) got beaten up badly after it reported earnings in May 2012, finally bottoming in August. Since then it has been trending higher, making a series of higher lows along the rising trend line, and nearly retraced 50% of the move lower. Since that peak in January, though, it has been pulling back and is now retesting support at the simple moving averages (SMA).

Notice that a Golden Cross is about to print and the relative strength index (RSI) is holding in bullish territory despite the moving average convergence divergence indicator (MACD) diverging, crossing to negative. There is still risk of a further pullback in this stock which may give you a better entry at the rising trend line.

On the other hand NutriSystems (NTRI) looks primed to go. It also fell hard, after its last earnings release in November.

NutriSystems (NTRI)

chart
Click to Enlarge

It is also stair stepping higher with a series of higher lows and higher highs. At the 50-day SMA now it is forming a bull flag for another move higher. It has support from the RSI that is rising and bullish and a MACD that averted a cross to negative.

In fact, Thursday’s price action could be interpreted as a move higher from consolidation at the 38.2% Fibonacci level. With a gap fill in sights and resistance above that at 9.70, which coincides with the 61.8% retracement of the move lower and the 200-day SMA, this looks like a much better trade, against a stop in the 8.690 area, than Weight Watchers (WTW) at the moment.

By Greg Harmon of Dragonfly Capital

Related Articles on STOCKS