Whole Foods Market Inc. (WFMI) reported better-than-expected earnings on Nov 03, 2010, and raised its full-year guidance. The stock gapped up almost 10% next morning and then rallied to an intra-day high of 48.02 (which is also WFMI’s 52-week high). Since then, the stock has been trading sideways in a very narrow range, creating a volatility squeeze (please refer to the attached chart of WFMI; source: StockCharts.com). In the mean time, the 20-day moving average has also moved higher to 46. The charts indicate that WFMI is poised to make a big move either way. I believe that it moves higher if it can break above the 48-level. The fundamentals also line up quite well as more and more people are becoming conscious about what they eat. The US economy showing some consistent improvement could provide the next boost.
I believe one can take advantage of this by going long WFMI. I would also recommend a stop-loss at 44.75, which is just below the intra-day low on Nov 04, 2010.
(Full Disclosure: Author long WFMI shares at the time of writing)