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TORONTO (GlobeinvestorGOLD) - According to some polls, dieting ranks among one of the top ten New Year's resolutions made every January and waist-watching companies are hard at work advertising the virtues of their own dieting system to try to help you achieve your goals. However, technical analysis of two publicly traded weight loss companies reveals that their share prices are reflective of the yoyo-dieting world. Now as one company's share price appears to have peaked temporarily, the other appears ready to muscle up.
Climbing from a 2005 low of $2.81 (U.S.), NutriSystems' share price rose meteorically to a December high of $44.15. However, the party might be over for a while as the final week of 2005 saw the share price gap lower by $3 to $36.85 thus forming a falling window candlestick, and which now puts the share price below the 10-week moving average. In addition the moving average convergence/divergence oscillator (MACD) is rolling over from an overbought level and appears to be issuing a sell signal, as it is about to cross down below the shorter exponential moving average.
Also on a daily basis the stock has dropped below the lower oversold Bollinger band suggesting further downside pressure ahead. Although the stock may have minor support at the 20-week MA of about $30 substantially more significant support is found at a previous resistant area of $25.30, which would offer investors a potential buying opportunity.
The stock appears to be in the fourth wave of a five wave Elliott Wave advance. Once the correction is over the renewed rally should lift the stock back to its previous high of about $45 over the next year.
Weight Watchers International Inc., another direct marketer of prepackaged diet products has been a mini roller coaster ride investment as it traced out a bullish inverted head-and-shoulders pattern over the past four years. This type of pattern is frustrating as it is slow to unfold but it appears the pattern is complete in the case at hand and with a return move back to retest the $49 neckline breakout now out of the way the stock should be clear to resume its uptrend in short order. It might be another week before it gets back on track however, as the stock is still in a corrective mode. As the shorter averages converge the 20-day MA offers support, but a test of the 41-day MA at about $48 might be needed to finally get the stock rolling on the positive track.
On a weekly basis the MACD is quite oversold but hasn't issued a buy signal as yet as it trends sideways. The oscillator's position though strongly supports the possibility of a short-term price surge once the signal is given and the technical measurement suggests a target of about $65 over the following three to six months.
Yola Edwards is a contributing writer and technical analyst for Bell Globemedia Interactive, providing options and technical analysis research on a variety of North American equities.