Sustained drop below $36 could trigger a long-term downtrend FactSetBig, bearish head-and-shoulders pattern on the verge of being confirmedWhole Foods Market Inc. may not have as much time as it hopes to repair its image, because the natural-foods grocer’s stock has reached the edge of a technical cliff, that warns of a potentially massive selloff. The stock tumbled 11.6% to close at $36.08 on Thursday after the company on Wednesday reported disappointing third-quarter results and provided a downbeat outlook. While the company WFM, +0.89% did mention a number of headwinds that have been holding it back, such as increased competition, price deflation in certain categories and a more price-sensitive consumer, management also highlighted the negative national media attention it got from the Department of Consumer Affairs weights-and-measures audit in New York City, showing the company had repeatedly overcharged its customers.Co–Chief Executive Officer Walter Robb said in a conference call with analysts late Wednesday, according to a FactSet transcript, that same-store sales “dropped sharply” after the New York audit. And when trust with the customer is broken, as it was after the DCA audit, “it has to be rebuilt a step at a time through solid execution day in and day out.” But time is a luxury the stock doesn’t appear to have, even if the store chain might. As the chart above shows, the stock is on the verge of completing one of the best-known and most fared chart patterns, a long-term bearish head-and-shoulders reversal. A sustained close below the base of the pattern, or neckline, is needed to confirm the pattern, which the stock has been building for the last 3 ½ years. And the rule of thumb among chart watchers is, the longer it takes to produce a negative technical pattern, the longer the downtrend that follows will last. As the chart below shows, this wouldn’t be the first time that a confirmed long-term head-and-shoulders pattern preceded a prolonged selloff in the stock. FactSet There is still hope that the stock will avoid the damage, as Robb said he has already seen a slight improvement in same-store-sales trends since the current quarter started:Whole Foods Market same-store sales growth in the weeks surrounding the New York City Department of Consumer Affairs’ weights-and-measures audit9 weeks ended April 122.4%10 weeks ended June 21*2.6%2 weeks ended July 5**0.4%3 weeks ended July 260.6%*DCA audit news broke on June 24 **Q3 ended on July 5Source: Whole Foods Market Inc. And kudos to Whole Foods for immediately acknowledging, and then moving to fix, the problem. Some other companies faced with a loss of customer trust have failed to do act so decisively, with painful results. Lumber Liquidators, for one,took time to respond to negative press, then tried to defend itself rather than address the issue. “As soon as the New York Department of Consumer Affairs came to us, we worked to understand and address the issues to prevent them from happening again,” Robb said, according to a FactSet transcript. MarketWatch