Medifast, Inc., incorporated on May 5, 1989, produces, distributes and sells weight loss, weight management, and healthy living products, and other consumable health and nutritional products. The Company’s product lines include weight loss, weight management, and healthy living meal replacements, snacks, hydration products, and vitamins. Its business units include Optavia, Medifast Direct, Franchise Medifast Weight Control Centers (MWCC) and Medifast Wholesale. Optavia is a personal coaching division of the Company that consists of Optavia Coaches, who are contractors and trained to provide coaching and support to clients utilizing the Optavia platform. Its Optavia Coaches provide coaching and support to their clients throughout the weight-loss and weight-maintenance process. Its Optavia product line includes OPTAVIA Essential Fuelings and OPTAVIA snacks. The Company, through Medifast Direct, its direct-to-consumer business unit, allows customers to order Medifast products directly through its Website or its in-house call center. The MWCC business unit sells product through franchise and reseller locations, which offers structured programs and a team of professionals to help customers achieve weight-loss and weight-management success at center locations. As of June 30, 2017, MWCC had 36 franchised centers located in Arizona, California, Louisiana, Minnesota, Maryland, and Wisconsin and two reseller locations in Maryland and Pennsylvania. Its medical provider practices carry an inventory of wholesale products and resell them to patients while providing support to help ensure healthy weight loss and weight management.
This stock has been on a tear alongside other distributors of weight loss programs -- WTW, NTRI, HLF, etc. There is resistance between $167.86 and $169.95 -- four fib extensions; three on the daily and one on the weekly. Support is priced between $141.03 and $149.06. It look like a good short, just as a trade, above $160 on R/R basis but this is an illiquid stock with a small float. If $142.80 gets broken to the downside it will put an end to the momentum trade. Late January, early February points to an important date that either prepares the stock for higher prices or possibly causes a break in trend.
Even with an uneasy market, the stock gets little traction to the downside. This shows how crowded the trade has become, and speaks to a certain extent, on the amount of complacency in the broader market where alpha is generated mostly with small cap stocks. $167.86 to $169.95 is a major resistance point. I have a hard time believing this trades higher without first contesting lower bands of support, namely, $160.63, $155.16 and $148.03.
Surpassed the fibonacci cluster of $167.86 to $169.95 that I thought would serve as short term resistance. I was wrong. Now these points serve as support into the extension. $182.60 to $183.59 is the next fibonacci cluster. Watch for a possible test of this level before a retracement. Initial support between $167.86 to $169.95, then $160.45 to $162.28 and major support at $142 to $148 that defines the momentum trade, and in time, the mid-term uptrend.
The bigger the rally, the bigger the eventual snap-back if there is nothing but speculative buying embedded in the share price from the point of the original breakout. The company declared a dividend payable to those on file as of 6/28/2018. That drove people to buy into it as momentum persisted, but I don't understand who would do this when there was an imbalance in the R/R profile. In their minds, they thought it was a double whammy -- hop onto a resilient momentum trade with the added bonus of a dividend. I did not expect a move above resistance of $167.86 and $169.95 to then retrace down to $148.03 ($146.01 is the low so far today).But it happened. This is the same washout phase we`ve seen produced in other small float, illiquid names such as COHR, TREE this year. Even mighty NVDA has seen sharp one week declines. It's the only way to correct for the imbalance. Some are swift and ephemeral; others long in duration but small in price correction. There is no way of telling which, other than remain disciplined to your price points. The difference between NVDA and a name like TREE is that NVDA is still expanding into its moat while TREE fundamental business have changed because of the rise in interest rates. The former was buy into weakness, the latter a sell into strength. MED is a question mark because it does not have a long enough history of consistently beating earnings, it is in a comparative disadvantage to its peers, yet it is an industry that is expanding. I would wait to see how the 140s hold, and whether a retracement up to $160 even occurs. If the stock struggles to reclaim the high base in the 160s, I would caution going long until 140s hold on multiple re-tests or recalims 160s on volume. Support is priced between $141.03 and $149.06. $142.80 remains the level to watch going forward. If that gets taken out the entire uptrend would be broken.
