Weight Watchers International, Inc. (WTW) has rewarded Oprah Winfrey's well-publicized 10% stake in 2017, with shares lifting nearly 400%, and it may continue to add points at a rapid pace in the fourth quarter. At this torrid pace, Weight Watchers stock could challenge the 2011 all-time high in the upper $80s in the coming months, doubling Oprah's profit once again. Better yet, the stock has now dropped into a price zone that could offer a low-risk entry.

The billionaire celebrity picked up more than 6 million shares in the single digits in the fourth quarter of 2015, with the news triggering a vertical advance that ran out of steam in the mid-$20s just one month later. The stock spent most of 2016 punishing starry-eyed shareholders, drifting lower in an endless downtick that found support near her original entry price in September. That low marked a historic opportunity to buy one of the top performers of 2017. (See also: Oprah's Weight Watchers Bet Finally Paying Off.)

WTW Long-Term Chart (2001 – 2017)

Weight Watchers stock came public just two months after the Sept. 11 attacks in 2001, catching an immediate updraft that topped out at $50.39 in November 2002. It fell into the low $30s in 2004, establishing a trading range that stretched into the upper $50s in 2005, ahead of a 2008 breakdown that posted a deep low in the mid-teens. The subsequent recovery wave caught fire in the second half of 2010, lifting the stock to an all-time high at $86.97 in May 2011.

It carved a double top pattern at that level and broke down in 2012, entering a downtrend that posted a long series of lower highs and lower lows into 2015. The bottom then dropped out in a vertical decline that relinquished another 25 points in less than six months. Selling pressure settled at an all-time low at $3.67 in July 2015, just three months before Winfrey announced a 10% stake at an average price of $6.79 for a total investment of $43.20 million. Those shares are now worth more than $280 million. (For more, see: Time to Sell Weight Watchers After 103% Year-to-Date Gain?)

The monthly stochastics oscillator entered a long-term buy cycle in October 2016, offering a stiff tailwind for the developing uptrend. It turned lower at the overbought level in August 2017 but has held above the trigger line into October, forestalling a long-term sell signal. This is typically bullish behavior in a strong uptrend, possibly signaling a renewed upturn that extends the current rally well into the $60s.

WTW Short-Term Chart (2015 – 2017)

The post-news rally stalled below the November 2014 high in the upper $20s while failing to reach the .382 Fibonacci retracement level of the multi-year downtrend. The decline into 2016 found support at the .786 rally retracement, carving the final leg of an Adam and Eve double bottom reversal. It finally broke out above the 2015 high in June 2017 and took off like a rocket, adding 21 points into the August high at $49.32. (See also: Weight Watchers Stock Rebounds to Upper End of Price Channel.)

The rally reached the 50% retracement of the long downtrend in August, giving way to a rounded correction that found support at the 50-day exponential moving average (EMA) in September. The stock completed a basing pattern at that level into October and broke out on Monday, lifting to a five-week high. It has pulled back into mid-week, testing base support, and could bounce into the mid-summer high in the coming weeks.

On-balance volume (OBV) took off in the fourth quarter of 2015, confirming euphoric buying pressure that barely budged during the long 2016 decline. This resilience underpinned bullish price action into 2017, with buying pressure picking up steam into August. The indicator has drifted lower into October but is holding well above prior lows, telling us that smart money is holding tightly to shares. (To learn more, see: Uncover Market Sentiment With On-Balance Volume.)

The Bottom Line

Weight Watchers stock broke out above the 2015 high in June 2017 and entered a momentum-fueled advance that has lifted it to a four-year high. Technical indicators have held their bullish tone during the recent pullback, opening the door to a fresh rally leg that could reach the $60s. (For additional reading, check out: 3 Under-the-Radar Momentum Plays.)

<Disclosure: The author held a long position in Weight Watchers at the time of publication.>

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