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November 10, 2005

Whole Foods follow up, Thurs., Nov. 10, 2005, 11:06 AM

Yesterday I wrote: There is one stock from the Food Store list that just pops out, and I'm happy to say has recently made it onto the Cara Global Best 100 Companies list. It is the Whole Foods Markets (NDQ: WMFI).

WMFI is a little pricey right now (early Nov-05), as the interactive chart shows, but a bear market is like an ebbing tide, where all boats sink. Whole Foods, however, has a stock price that might defy gravity. We'll see.

Early today I did a first follow up for WFMI. Here is another.

WFMI has dropped a lot this morning, down "17 pct to about $132. It has reached the first level support. There is a second level support at about $120, and a third level at $100.

This sell-off is precisely what long-term traders are looking for. I'm not going to tell anybody how to play this, but writing puts at strike prices through each support level, a little at a time, as the stock ratchets down to a normalized (i.e., average long-term sustainable) PE multiple, is a good tactic. A little now; then if the stock drops to 120, a little more. And if it gets all the way to 100, a little more still.

What you will have accomplished is to avoid having chased the inflated stock price (above 150) of a couple days ago, (or at 140 a month ago), when RSI was above 70.

For a company that is solid long-term, you want to wait until the market hands it to you. That's the way to buy low and sell high.

Posted by Posted by Bill Cara on November 10, 2005 11:05:57 AM | Category: 30 Consumer Staples