Whole Foods Market, Inc. (WFM) Earnings Preview

Whole Foods Market, Inc. (WFM) is a retailer specializing in organic and natural foods and groceries. The company’s stock is currently trading around $30.80 in a 52 week range of $29.73-$57.57. The stock has been massively under performing the market this year with shares falling nearly 39% year to date. The company is set to report earnings after the bell today and based on metrics we track the stock may be primed for another move lower.

WFM has sold off on 6 of the past 8 quarters with an average move of 9.8% on earnings day. The stock is also looking vey weak on a chart. The stock is lower by over 1.2% today and the Ichimoku Cloud is indicating a strong bearish trend in WFM. The stock is trading well below the cloud and the future cloud is sloping lower. Using our AlphaTracker Indicator we are also able to see that big money is net short WFM stock ahead of the release. For all of these reasons I am looking to get short WFM on earnings.
With the options market implying a move of around $3.20 by this Friday’s close we are able to calculate a downside target of $27.60. Using this level I can set up a potential options trade.

Trade: Buying the WFM Nov 6th Weekly 29.5-27.5 for $0.55
Risk: $55 per 1 lot
Reward: $145 per 1 lot
Breakeven: $28.95

This trade gives a trader a reward to risk ratio better than 2.5-1