Whole Foods Market (NASDAQ: WFM) is the leader in organic food retail. The company has around 300 stores in the U.S. and its plans of growing to around 1000 stores are reflected in the growth rate of organic food. Currently organic food is more than 4% of total food sales and over the past two years has grown about 6% per annum. As organic food demand is to a good extent somewhat cyclical in nature, a pickup in employment could cause organic food sales to grow much more rapidly.
On an eight month long chart we note the uptrend (blue line) originating in October 2010 that was broken to 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 Whole Foods Market (NASDAQ: WFM) did some necessary backing and filling after such a strong move up and completed the gap fill from February (upper gray box). All of this is constructive action of a healthy stock.
Zooming in closer 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. Whole Foods Market (NASDAQ: WFM) then found resistance at $64.40, which coincides with a gap down from April 28. Some consolidation here is a healthy sign that this stock is getting ready for another potential move higher.
I first want to see the stock break and hold above the $65 area and show me the money so to speak. 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 at $70.