| December 19, 2014

December 19, 2014

Trade Alert:

Buy WAG January 16th 2015 $75.00 Calls at $1.70 or better

Company Background:

Walgreens (WAG) owns and operates drugstores in the USA.

Short-Term Catalyst:

WAG is in the sweet spot of two very bullish trends… healthcare and retail.

Healthcare stocks have been on fire due to a strong increase in healthcare spending. And the recent drop in oil prices should benefit retail stocks because consumers have more money to spend on everything else.

Recent history has shown that consumers spend more money on health and wellness products when they have a little extra money to spend.

And that’s the case right now… the drop in gas prices isn’t enough for consumers to hog wild.  But it’s enough for them to have a little extra to spend on a health product they might otherwise do without.

In fact, we have already seen one of Walgreen’s competitors, Rite Aid (RAD), beat earnings this quarter and raise their full year earnings forecast.  The great quarter triggered a 10% jump in RAD’s share price.

I think we’ll see similar results when WAG reports earnings next week.

A 10% pop in WAG would create a very bullish technical breakout for WAG.  This should pull in lots of new money and send the share price soaring toward $80.00 per share before the option expires in January.

Let’s grab call options on WAG before they report earnings next week.

Trade Details:

Underlying Stock Symbol: WAG
Current Bid-Ask Price: $1.58 – $1.62
Option “Buy Up To” Price: $1.70
Break-Even On Stock At Expiration: $76.70
Maximum Risk Per Contract: $170


Exit Strategy:

WAG is trading at $73.61 per share.  Resistance levels will be at $77.00 and again at $80.00.  Remember, we want this stock to move higher.  Support levels will be at $68.00 and $66.00.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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