So what's to be done now? First, here is the follow up report on Whole Foods. Download UBS Aug 1 WFMI report.

The UBS analyst (Neil Currie) is not satisfied with the clarity of the sales guidance going into 2007. He has a 12-month price target of $62 based on a 37x PE on an est. EPS (2007) of $1.68.

So what is happening here is that the Street is starting to address the very high PE issue with WFMI stock. As I see it, the talk of "confusing sales guidance" is a red herring. The fact is this is a Bear market, and PE's well over 50 for a food retailer don't quite cut it.

That makes it an interesting case. How low does the acceptable PE multiple go?

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Next, here are the charts showing Relative Strength Index (RSI) technical indicators

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As the Monthly/Weekly/Daily RSI is now at 30.7/18.9/19.8, WFMI is almost (but not quite) at the Cara Accumulation zone.

Actually, in a trendless (sideways moving) market, the 30-70 RSI lines are ok to use (if you adapt them to the nuances of trading each stock), but in a Bear market, you may want to drop the numbers to 25-65 or even 20-60. For a Bull market, these numbers would be higher, say 35-75 or 40-80 or even 45-85 in the early phase of a Bull.

In a Bear, I look at the company story before deciding in my mind what RSI numbers to use. If there is a large homogenous peer group, like casinos, semiconductors, money center banks, etc, then I have a better idea of where the Accumulation/Distribution lines ought to be set. But for a company like Whole Foods, it's harder. Who knows of another Whole Foods? This company really has few equals, if any.

So, the answer I'm going to give for WFMI is that in order to make a call on Accumulation I'm going to peg it to the GICS Sector 30 (consumer staples) index and at the same time focus more on the bottoming of the Weekly-Daily than the Monthly RSI 7.

But I don't think we are far away. After Wall Street issues all their down-grades on WFMI in the next week or two, the stock ought to be an Accumulation candidate. Then I'd recommend writing some puts with low strike prices before starting to watch the Daily and Hourly RSI 7 data.

At the end of the day, only a liar is going to say that he or she got the absolute low price. The one who did would not even know, and it would be part of a block purchase where the low price was averaged in any event.

Your objective is not to try to hit the bottom, anyway; it's to consistently buy in an Accumulation zone and sell in a Distribution zone for real high quality companies. Let the rest take care of itself.

Sometimes you wonder why I'm not like the typical technical analysis crowd, issuing precise numbers and all. It's because you first have to learn that particular aspect of science (i.e., the numbers and the technical indicators) and then you must apply it as an art form. Trading is like a dance, with prices in motion. There is no perfect dancer " except maybe on "Reality" TV. (LOL)

To sum up, I'd feel comfortable buying WFMI in the 40's. After all, there were many financial institutions buying it up to its recent high of $79.90 about seven months ago. At least you know I wasn't advising it at those high prices. (lol)

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Whole Foods Market, Inc. [GICS 45, Cara 100]

(WFMI: Yahoo Finance file)
(WFMI: StockChart chart)
(WFMI: Investertech chart)
(WFMI: ADVFN Financial Data)
(WFMI: ADVFN Financial Data)

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