EOT Trade Alert: January 9, 2012

| January 9, 2012

January 9, 2012

Trade Alert:

  Buy TGT April 2012 $50 Calls at $1.75 or better

Company Background:

Target (TGT) operates general merchandise stores across 49 states.  They offer a wide range of household merchandise including personal care, baby care, and beauty products.  TGT also carries an array of electronics, movie, and sports products.  In addition to Target’s brand name merchandise, they sell a large amount of products under their private label brand.

Short-Term Catalyst:

We need to jump into TGT right now!

Here’s why…

Target has been known for its solid performance and steady dividend for nearly a decade.  In addition, except for the financial crisis, TGT has traded in a pretty defined range between $45 and $60 per share during the same period.

As a result, there hasn’t been many opportunities to buy TGT at the low end of its trading range.

That’s why we must act fast.

Last week, TGT fell 3% to $48 a share on news their December same store sales only grew by 1.6% instead of the 3.1% most analysts expected.

Come on, that’s just one month’s number.

There’s no reason the shares should be down that much.  In fact, TGT is still ahead of their annual 2011 year over year sales comparison.  Fiscal 2011 (ending January 31st) is still virtually certain to come in at all time high levels for both revenues and earnings.

Lastly, TGT is trading at just 12x 2011 earnings estimates.  That’s well below its ten year median multiple of 18x.  If TGT could get just a slight nudge to 13x 2012 earnings, it would bring Target’s share price right back to $60.

Bottom line…

This is a great opportunity to buy TGT on the cheap.  Let’s grab call options on TGT to profit from this rare opportunity.

Trade Details:

Underlying Stock Symbol: TGT
Current Bid-Ask Price: $1.49 – $1.55
Option “Buy Up To” Price: $1.75
Break-Even On Stock At Expiration: $51.75
Maximum Risk Per Contract: $175


Exit Strategy:

TGT is trading at $48.60 per share.  Resistance levels will be at $55 and again at $60. Don’t forget, we want this stock to move higher.  Support levels will be at $42.50 and $40.  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

About the Author ()

Comments are closed.