How To Profit From Support Breakdowns And Resistance Breakthroughs

Whole Foods Market, Inc. (WFMI) owns and operates a chain of natural and organic foods supermarket. As of September 30, 2008, the Company operated 275 stores organized into 11 geographic operating regions, 264 stores in 38 United States of America states and the District of Columbia; six stores in Canada, and five stores in the United Kingdom

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There were 4 trading alerts today for WFMI. These were based on breakdown of supports and breakout of resistances. As mentioned in the chart, once key support levels are broken down, the stock keeps moving lower. The rationale behind this is pretty simple. Most traders place their stop loss below key support levels. If these support levels are broken, the stop losses get triggered putting more pressure on the stock. WFMI saw a continous sell-off after the morning spike. After every key support was broken, sellers poured in, taking the stock lower and lower. (Breaking down from $18.20 to $16.80 levels)

Eventually in the last half hour, bulls took control of the stock and broke past the $17.00 on the upside, providing a quick long entry.