Whole Foods Market (WFM) is bouncing back after an abysmal May selloff prompted by a disappointing earnings report. The higher-end health food grocer admits it may have set its targets too high after posting huge numbers last year and peaking around $65. The May drawback, in which the stock traded almost inversely with broader bull market, featured the biggest losing day since the years leading up to the financial crisis when consumers had to curtail spending.
This is a cheap long for investors that believe in the business model as WFM is likely to see big gains. With the health craze ever expanding in the US and the recent, and perhaps disproportionate, selloff, Whole Foods stands to rally hard if it can hit its earnings projections, which it is hoping to do by implementing new cost cutting programs to streamline its supply chain.
The chart is looking great for WFM as it’s flying high above the cloud and projected to continue. The stock has found solid support levels and has broken resistance consistently today, up $1.71. Regardless, I don’t see the company, with its extremely passionate customer base, going anywhere.
The Trade: Buying the WFM July 42 Calls for $.33
Targets: Sell 25% at $.50, Sell 25% at $.65, Sell 25% at $.80, Sell 25% at $1.00
Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long