Whole Foods Looks Ready to Bounce

A gap just overhead could act as an upside magnet

Whole Foods Market (WFM) is the largest U.S. chain of organic and natural foods supermarkets. On July 31 Whole Foods’ stock fell 88 cents after fiscal third-quarter earnings of 41 cents beat estimates of 39 cents but failed to meet revenue estimates.

Despite the disappointment, the company delivered top-line growth of 10.4% year-over-year according to Zacks Investment Research. Even though management lowered its comparable store sales and guidance for 2014, Standard & Poor’s estimates fiscal 2014 earnings at $1.53, up from $1.47, and sees EPS rising 12% to $1.71 in FY ’15.

The stock has fallen 45% from its high of over $65 made last October. But yesterday, even in the face of a broad market decline, WFM rose 59 cents, challenging its 50-day moving average at $38.77.

A trading gap exists between $47.87 and $39.48, which was partially filled on June 13 at $42.90. That gap could serve as a magnet, attracting buyers back to the $48-plus area. And call options have increased by four-times average volume while stock volume also increased dramatically as the stock advanced.

Whole Foods (WFM)

WFM not only appears “sold out,” but if it can break above its 50-day moving average it could run back to between its bearish resistance line at $45 and the 200-day moving average now at $49.77. This stock is a speculation, but a speculation on one of the best-managed companies in its sector that could be held as an attractive long-term investment.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/08/buy-whole-foods/.

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