By: Zev Spiro
Williams Sonoma Inc. (WSM) began forming a bearish ascending wedge pattern at the end of July 2010. The pattern was triggered by a gap-down below the lower boundary line on November 18th, with added confirmation via a surge in volume. Adding to the bearish tone was a recent break of the long term uptrend line, on January 13th, also accompanied by heavy volume. The price objective is back to the lows of the pattern, which is $24.50.
Chart 1: Displays the recent break of the uptrend for the comparative relative strength of WSM to SPY.
Chart 2: Illustrates the ascending wedge pattern and the break of the long term uptrend line. Target: $24.50, Stops: Confirmed move above $35. Increased risk/reward entry: short a bounce into the 33-33.50 range.
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*DISCLOSURE: Short WSM
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