Weight Watchers International, Inc. (WTW) is finally paying off for Oprah Winfrey, following a roller-coaster ride that began with her $43.2-million stake, purchased at $6.78 in October 2015. The stock has traded as high as $28.05 and as low as $9.37 since her acquisition and board seating, with the momentum crowd reacting wildly to each report of her progress or setbacks with weight loss.
Price action during her reign has carved a rounded base that could signal the final stage of a double bottom, ahead of an uptrend that reaches 3-year horizontal resistance in the upper-20s. The technical tone will improve significantly if the stock trades into the 30s, setting the stage for even higher prices in coming years. Given the retail crowd’s obsession for Oprah and her poundage, the ten or so points between the current price and resistance level could get covered quickly.
The company was founded in 1963 but didn’t go public until November 2001, opening at $29.75 and heading into an immediate uptrend that peaked just above $50 in October 2002. It traded within a narrow range for the next five years, holding the low, while adding just 9 points into 2005 when it topped out. A 2007 test at that level attracted aggressive sellers, triggering the last stage of a double top, ahead of a breakdown during the 2008 economic collapse.
The stock posted the lowest-low since the IPO in March 2009, reversing at $16.41 and bouncing in a recovery wave that reached the prior highs in February 2011. It broke out into the second quarter but topped out quickly, hitting an all-time high at $86.97 and pulling back into a double top that broke down in 2012. That downtrend broke the bear market low in 2015 (blue line) and is still in progress as we head into the second quarter of 2017.
The monthly Stochastics oscillator entered the first buy cycle since 2015 in December 2016 and is now guiding longer-term price action. It’s still grinding below the overbought zone, predicting at least three to six more months of bullish control. This window of opportunity could yield a relatively quick advance into the upper-20s that completes a longer-term breakout pattern (red line).
A vertical plunge into 2015 posted an all-time low at $3.67 just three months before Oprah’s stake, which triggered a 100% one day gain. Euphoric buying pressure stalled just below the October 2014 swing high at $29.84 in November, giving way to a reality check that wiped out late-to-the-party shareholders with a 60% 3-month decline. That selloff found support at the breakaway gap, giving way to a 14-month rounded base that carving a higher long-term low while reestablishing support at the bear market low (blue line).
The March 1 gap mounted the bear market low, with price action into April filling the gap, ahead of the current test at the rally high. This is highly constructive action in a relatively weak market environment, signaling a bullish divergence that should translate into much higher prices. The $18 to $20 price zone looks like a final barrier in this scenario, with a breakout into the lower-20s setting off a more vertical advance.
The red line near $30 will take center stage if the current uptick reaches that level in coming months because it marks a major inflection point that can generate a larger scale assault into the .618 retracement level of the 2012 into 2015 downtrend in the upper-50s. It’s unlikely the long-term uptrend can exceed that barrier in coming years, given the ferocity of the 2012 double top breakdown.
The Bottom Line
Oprah Winfrey’s 2015 investment in Weight Watchers has booked substantial profits after a wild ride that’s shaken out many shorter-term market players. Price action through this period has finally completed a broad bottoming pattern that favors more rapid gains into the second half of 2017.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>