Trade of the Day: Whole Foods Markets (WFM)

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Whole Foods Markets (WFM) closed just below the 50- and 100-day moving averages on Friday after trading to a high of $31.45. A move above $31.50-$32 should lead towards a possible push at $33-$34 and the 200-day moving average. Short-term support is at $30.50-$30.

Whole Foods

Whole Foods recently announced better-than-expected earnings of $0.46 a share on revenue of $4.83 billion. Analysts had expected $0.40 a share on revenue of $4.81 billion. This follows two quarters where it missed expectations by $0.05 and $0.02, respectively.

The suits-and-ties were split after the earnings announcement, with both bullish and bearish comments crossing the tape. Oppenheimer and SunTrust kept their “Outperform” and “Buy” ratings on the stock, with both price targets remaining at $38. Another brokerage firm kept its “Neutral” rating and $27 price target on WFM despite the earnings beat, saying its sales outlook remains uncertain. And, finally, with shares just above $30 mid-month, Wells Fargo initiated coverage of the stock with a “Market Perform” rating and a $27-$28 price target.

Whole Foods shares are down nearly 50% from their 52-week high of $57.08 after bottoming at a 52-week low of $28.07 earlier this month.

It is too early to say that a “turnaround” is in store for Whole Foods, as the organic food market is a crowded space. However, the company remains one of the best brands in the industry and is slated to open a new chain of stores called 365.

Each 365 store will have a different mix of vendors aimed to attract millennial shoppers, and they will operate independently of Whole Foods. Los Angeles will be the first city to get a 365 store in May, and I will be eager to see how they perform. To that end, I recommend the following bullish call option to play this:

Buy to open the WFM April 33 calls (WFM160415C00033000) at current levels.

My Exit Target for the trade is $1.10. I do not have a stop loss in place at this time.

In the meantime, with improving fundamentals and a bullish chart, I’m looking for shares to continue their rise to the mid-$30s. If shares are above $34 come mid-April, these options will easily double from current levels, which is where we can start locking in profits.

To receive further instructions on this trade, please sign-up for a risk-free, 60-day trial of Momentum Options and take advantage of 50% off the introductory rate for the next three days only.  You’ll also receive my brand new March Stock Watch List, and 6 other key option trading reports.


Article printed from InvestorPlace Media, https://investorplace.com/2016/02/whole-foods-markets-wfm/.

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