BULLSEYE! Target Corp in the Crosshairs; Meat for Dinner. (TGT)

We made 255% from our last dalliance with Target shares (NYSE:TGT), and the details of that endeavor can be found HERE.

Never satisfied, however, with just one helping of gooseflesh, we’re AGAIN zeroing in on this merchandiser of everything saleable in the hope of ultimately chowing down like a pack of Belgian she-wolves on the quarry.

Not ME!

There’s lots to commend the management and directorate of Target Stores… but the stock price is not connected to those efforts, so we can ignore them altogether.

In short, TGT is an overbought stock, regardless of what the underlying fundamentals may be.

And what, incidentally, are they?

Consider –

• P/E is a (relatively) reasonable 20.15, though legacy bricks and mortar businesses generally don’t fetch that sort of multiple.
• Dividend yield is 1.46%, which is better than nothing, while
• Price to Book is a far-too-large 8.22.
• Especially since analysts see flat to lower earnings for the twelve months ahead.

I’ll say…

All the more so, since much of what drove recent growth was management’s quick response to the Batflu caper, offering “drive-up” and same day delivery options before competitors caught on.

With a return to (the new) normal, we believe those ‘advantages’ will become superfluous.  Given the full range of retail spending opportunities, consumers will again spread out, and Target’s market share will diminish.

As the charts below show, the bulls have squeezed TGT stock for all it’s worth, and all that remains going forward – is reality.

Have a look at the daily –

1. The technicals show an overbought RSI read that was tripped late last week (in green), and
2. A rising wedge formation (in red) that’s nearly complete.  If and when the lower edge of the wedge is broken (in blue, at roughly 238), we’ll see significant technical selling.  Rising wedges are always bearish.
3. At that point, next support will arrive at 200.

Now the weekly –

1. Strike 2 (in green) is now being registered, as WEEKLY RSI touches its overbought 80 line.  Together with the daily overbought signal, the two pose a grave problem for bulls.  It’s rare to see a stock climb once both daily and weekly RSI reach the thinning upper atmosphere.
2. In addition, the weekly chart demonstrates just how far – and for how long – price has separated from her salient moving averages (in blue).  As an example, the 137 week MA has not been touched for over 30 months!  This is unsustainable.
3. Simple Fibonacci retracement calculations see a retreat to either 171 and/or 125 (in purple).

And finally, the monthly –

1. The most flagrant technical issue here is the monthly RSI overbought indication (in green), which has been both lasting and malignant.
   It should also be noted that volume levels have retreated disproportionately as the overbought read persisted – as if traders knew, and were waiting for the inevitable.
2. The last time (monthly) RSI approached this level was in November/December of 2019 – after which a 30% decline ensued (in red)!

All of which points us to the gun closet, where our Combo Pump-Action 22 resides.

And she’s singing the following tune…

A Jew and His Money recommends you purchase the TGT October 15^th 230/210 PUT spread* for a debit of $3.87 (5.80/1.93).

[*Buy the 230 PUT and sell the 210 PUT.]

Rationale: Three RSI overbought indications is the equivalent of a capital case of body shaming.

At the same time, tight spreads give us a formidable opportunity to profit from a straight spread purchase on TGT.

For $3.87, we buy the possibility of a maximum profit of $16.13 should TGT decline to 210 by expiry.

Maximum loss is limited to our initial debit of $3.87.

With TGT looking ready to retrace, we see the move to 210 as likely.  The stock just crossed decidedly above 210 a month ago, so it would only be returning a small percentage of its overall gain in retreating to that level.

The time frame is also generous; we have until October to fetch a profit here, though we’ve a hunch it’ll come a lot sooner.

Keep your eyes peeled, good Jews and Noahides, and ask the Holy One for help.

Only the Al-mighty Living G-d of Israel can decide in our favor.

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew