Whole Foods Market (NASDAQ: WFM) — This company is a leading organic food retailer. It currently has about 300 stores in the United States, with plans to expand to around 1,000 stores, reflecting the growth rate of the organic food market. Currently, organic food accounts for more than 4% of total food sales, and over the past two years, this number has grown about 6% per annum. As organic food demand is somewhat cyclical in nature, a pickup in employment could cause organic food sales to grow much faster.
Moving on to WFM stock, on an eight-month chart, we note the uptrend (blue line) originating in October 2010, which was broken in early May. An almost 10% gap up (lower gray box) in early November, gave the stock more power to the upside.
After breaking below the blue uptrend line, WFM did some backing and filling, which was necessary after such a strong move up, and completed the gap fill from February (upper gray box). All of this should be viewed as constructive action in a healthy stock.
Zooming in, we see the sharp move higher off the gap fill (gray box) where the stock rallied 18.5% in just about two-and-a-half weeks. WFM stock then found resistance at $64.40, which coincides with a gap down from April 28. Some consolidation here is a healthy sign that the stock is getting ready for another move higher.
I would like to see the stock break and hold above the $65 area. On a solid daily close above $65, I see a trade to the long side setting up with a stop at $62.30 and a target of $70.
- See Sam Collins’ Daily Market Outlook: A Correction May Still be in the Works
- See Serge Berger’s Daily Market Outlook: The Longer the Rally Lasts, the Harder Stocks Will Fall
- See Sam Collins’ Trade of the Day: GLD Could be Your Golden Ticket
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
