Whole Foods Markets Inc. (WFM) has been trading in the range of $84.00 – $104.00 in the past 30 days and is seeing very strong technical and fundamental characteristics that make it a buying opportunity.

WFM stock has been showing support around $93.40, with resistance in the $113.00 range. The stock is trading above the 50-Day Moving Average and above the 200-day moving average. RSI indicator shows neutral reading at 65.50.

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A LOOK AT FUNDAMENTALS

WFM’s bullish technical indicators are supported by strong fundamentals, as well.

WFM posted a strong second quarter. Sales growth remained robust, as the firm grew sales 13% year-over-year to $3 billion. Earnings per share rose 19% year-over-year to $0.76, modestly exceeding consensus estimates.

Comparable-store sales rose 6.9% in the quarter, down from 8.9% in the prior-year quarter and 7.2% in the previous quarter. For the first 3 weeks of the third quarter, comparable-store sales jumped 9.4%. Identical-store sales climbed 6.6% in the quarter compared with 8.5% in the year-ago quarter and 7.1% in the preceding quarter. Whole Foods indicated that gross profit rose 13.5% to $1,101 million, whereas gross margin grew 5 basis points to 36.4% as occupancy costs shriveled as a percentage of sales. Store contribution soared 15.3% to $332 million. As a percentage of sales, store contribution increased 63 basis points to 11.3%.

DEBIT CALL SPREAD

Because technical and fundamental indicators both show a bullish environment for WFM, investors should consider the following debit call spread: Buy June 2013 105.00 Calls at $2.60 and sell the June 2013 110 calls at $0.80. The net debit to start is $1.60, and we recommend holding until spread price reaches $3.20. This strategy will allow you to collect time premium for the out of the money short call, decreasing the overall cost of the initial investment.