Wool tends to act like velcro on a small scale. What I mean is that some of the wool fibers can snag on nearby fibers. This often happens during the wash/dry cycle. The snags pull the fibers closer together and "shrink" the wool fabric. But it only shrinks a few percent and it isn't permanent.
The snags are weak, just like velcro. You can easilly pull velcro apart, and you can easilly pull wool snags apart. Thus, you can unsnag the wool fibers and pull them further away from each other thereby "stretching" the wool fabric. But it only stretches a few percent.
This whole "strink" and "stretch" is small but noticible, reversable, and can only be done a certain extent. Once you "shrink" it once, you can't keep shrinking it. The fibers have already snagged to the nearby fiber. In order to snag it on to another fiber, you have to unsnag it from the first fiber. Thus there are upper and lower bounds to what you can do with wool fabrics. Most of what people think about "shrinking" and "stretching" wool is a myth. Yes, it changes size, but only within a small bounded region. Sadly though, where it "shrinks" and "stretches" is largely out of your control.