EOT Trade Alert – November 4, 2015

Trade Alert:

Buy TGT January 15th 2016 $72.50 puts at $1.60 or better

 

Company Background:

Target Corporation (TGT) engages in owning and operating general merchandising stores. It also operates Super Target, with its own line of food and other general merchandise.

 

Short-Term Catalyst:

Target’s overall strategy continues to miss the mark.  They just can’t seem to find a way to grow revenue and continually find themselves in the public eye for all the wrong reasons.

Today, they announced a plan to close 13 stores nationwide due to decreasing profitability. The retail giant plans to close the stores January 30, 2016, just after the holiday season.

Target stock has been in a steady decline since reaching a high of $85.20 in July.

The stock is currently trading at $77.51 and I believe we will see further decline in the price during the holiday shopping season.

In 2013, Target took a major hit when it suffered a massive credit-card breach before Christmas that sent shoppers elsewhere. The company also attempted a major expansion into Canada, but pulled the plug on that after decreasing profits.

As a result of these setbacks, the stock has become expensive based on their current and future earnings. Right now the stock is trading at a P/E of nearly 17.31 and a forward P/E of 15.19. And that’s after a 9.46% decline from its 52-week high.

All signs point toward TGT making a move to the downside in the coming weeks.  In fact, I wouldn’t be surprised to see TGT fall back toward the 52-week low price of $59.20.

Let’s grab put options on TGT to profit from their decline in revenues.

 

Trade Details:

Underlying Stock Symbol:	TGT
Current Bid-Ask Price:	$1.47- $1.53
Option “Buy Up To” Price:	$1.60
Break-Even On Stock At Expiration:	$70.90
Maximum Risk Per Contract:	$160.00

 

Exit Strategy:

TGT is trading at $77.51 per share.  Resistance levels are at $80.00 and $82.50.  Remember, we want this stock to move lower.  Support levels will be at $70.00 and $65.00. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.

 

Chart:

 

Category: EOT Trade Alert