From 2008 to 2013, organic and natural foods retailer Whole Foods Market (NYSE: WFM) was a superstar. But backlash over its high prices and a reduced outlook ended the rally and sent the stock into a death spiral. 

WFM was one of 2014’s worst performers on the S&P 500. But after the decline culminated in a nearly 20% single-day loss in May 2014, the stock consolidated in a low range for six months — healing before finally waking up again.

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Fast forward to today and WFM is again healing in a low range following a disastrous 2015. But it’s also showing signs of life, so this could be deja vu all over again.

Whole Foods Setting Up For A Strong 2016? 

Whole Foods is in the consumer staples group, which is one of the only sectors showing strength year to date, although one could argue that organic quinoa and wild goji berries are not exactly items consumers can’t live without.

However, we are seeing a strong trend toward natural and organic foods, with the global organic food market estimated to grow at a double-digit compound annual rate through 2020. 

As we can see on the chart below, Whole Foods was already in decline when the market suffered a sharp sell-off last summer. The stock scored one of many gaps to the downside before settling into a six-month trading range, eerily echoing the six-month range of 2014. During both consolidations, technical indicators from momentum to cumulative volume started to turn higher. 

But the current range has even more to like. 

For starters, its relative performance versus the S&P 500 is edging slightly higher. Even better, WFM poked its head above its 200-day moving average this week for the first time since collapsing through it in May of last year. 

The weekly chart below shows an interesting set of Fibonacci retracement levels based on the 2008-2013 rally.

The bottom of the current trading range sits at the 61.8% retracement level of the rally. Indeed, support there also runs through the bottom of a short-lived range in 2011, making it a solid floor of support. 

The top of the current range is right at the 50% retracement level of the prior rally, making it a good resistance level to watch for a breakout. 

Because traders can put Fibonacci levels anywhere they want on a chart and pick the one that fits a preconceived view of the market, I like to draw at least two sets to see if they overlap. A cluster of Fibonacci levels creates a much stronger case for a move.

In that vein, a set of retracements from the 2013-2015 decline does indeed score some overlap. Specifically, the 38.2% retracement of the bull market and the 38.2% retracement of the bear market are both in the $42 area. 

That is also where we will see resistance from various highs and lows going back to 2012 to create a compelling trading target if the current range breaks to the upside. 

One last thing… Even though I am a technical analyst, I must admit that I like that the company reported better-than-expected earnings and revenue early last month. This adds a little beef to the argument that things are turning around for the stock. 

Recommended Trade Setup:

— Buy WFM above $35
— Set stop-loss at $33.25
— Set initial price target at $42 for a potential 20% gain in six weeks

Note: If you do buy shares of WFM, there’s a completely legal way to skim a few hundred dollars from Wall Street. In fact, you can do it with almost any publicly traded stock. It’s not stealing exactly. The money is there for the taking. You just have to beat Wall Street to it. Learn how average investors are doing just that in this free presentation — before it comes down.

This article was originally published on Profitable Trading: Left-for-Dead Stock on the Verge of a Bullish Breakout