Whole Foods Market, Inc. Stock (WFM) Due for a Bullish Move

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Whole Foods Market, Inc. (WFM) has been less than fruitful for WFM stock holders the past couple years. But between the firming technical picture, weak expectations and earnings catalysts are reasons to shop for a long WFM call position right now.

Let me explain.

whole foods stock earnings wfm stock

2015 wasn’t a good year for Whole Foods, as WFM gave up roughly 35%. The past couple years since hitting an all-time-high of $63 in October 2013, WFM has been even sourer with shares off by about 55%.

Growing competition from upstarts like Fresh Market (TFM) and larger chains such as Kroger (KR), coupled with WFM’s weaker margins, same-store-sales slump and a notorious pricing misstep have all played a part in treating WFM stock like bruised fruit the past couple years.

But trends change and Whole Foods stock is due for just that sort of bullish reversal.

Last year’s rollout of its new urban “365 by Whole Foods Market” stores aimed at millennials is a step toward helping WFM turn the corner.

Investors might also appreciate the value of Whole Foods formidable brand, first movers advantage in the upscale and health-conscience grocer space and the company’s solid balance sheet in determining the possibility for better times ahead in Whole Foods stock.

Also, the low analyst expectations are potentially bullish for WFM stock.

An average 12-month price target of $30 in WFM matches current levels following a 55% corrective move. Additionally, a full 67% of 31 analysts’ rate Whole Foods stock a hold, while only two maintain buy ratings.

The combination of a weak price target and dour ratings on WFM suggest a typically flat-to-wrong footed consensus. In turn, any company guidance which proves less than disastrous could more easily result in upgrades and price target revisions.

WFM Monthly Stock Chart

020116-wfm-monthly-stock-chart
Click to Enlarge
Source: Charts by TradingView

In carving out its corrective move of the past two years, Whole Foods stock has completed a two-step pattern, wherein leg AB = leg CD. In short, that’s bullish.

At the same time, the completion of the Fibonacci-based formation has occurred within the key 50% to 62% retracement zone based on WFM’s 2008 cycle low to 2013 cycle high.

Lastly, the current bottoming in WFM stock has developed a broadening or inverse triangle. Whole Foods is bullishly just off the lows of the reversal pattern and still well below potential resistance from $35 to $36.

In addition, with Whole Food stock’s monthly stochastics registering an oversold crossover and pointing up, there’s plenty of technical evidence of higher prices and an intermediate low in WFM.

Whole Foods Stock: Go Long

Given what’s been discussed and our expectations, I like the WFM March $32 call for up to $1 as a bullish position in Whole Foods stock.

To breakeven at expiration, the trader would require a move of 10% from the current $30 level; more to the point, a quicker bullish move in WFM stock would produce profits as there’s plenty of time left on the calendar for time and value to build.

Having said that, I do like the idea of hedging the long call in front of the earnings release if WFM gains ground and shows a profit.

One solid money management adjustment would be to sell a higher strike WFM call in March to build a low-to-no-cost vertical.

An adjustment into a vertical allows the trader to bet on continued upside in Whole Foods stock with reduced risk, cutting down on potential volatility and time decay threats through March.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT

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The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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

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