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Wealth, Fine. Misconduct, No. (TGT)

Posted on October 5, 2020

Amazing, the outpouring of hatred for the President since he was diagnosed with batflu.

Rarely seen anything like it.

So visceral and all-consuming…

So irrational…

Hatred like that –

You’d think the man was a Jew.

[Lots to unpack there, but we’re not gonna touch it.]

Anyway, we like the old babble-mouthed arse.  Mostly because he’s not polished (and doesn’t try to be), and doesn’t masquerade behind some phony “presidential” mien.

And not least because he’s the last possible bulwark (however fragile) against an arrogant, petty, bureaucratic takeover of the planet.

Today’s trade aims at bloated, general superseller, Target Corp. (NYSE:TGT), and every last one of its 2000 outlets across the land.

Hey! Cool it, Huey!

Nothing personal, of course.

The business has benefited from “essential service” status since the hysteria took hold.  And that’s led to some additional earnings.

But all told, it’s our unwavering conviction that action on the stock has far outpaced any rational accounting of the firm’s ledgers.

It’s therefore our objective to cast our full quiver toward a lower reading for Target stock.

Fundamentally, Target is relatively sound.

Relatively.

Outside of an obese Price to Book ratio of 6.33, the rest of the numbers are relatively sane:

She posts a trailing earnings multiple of 23 and

A dividend yield of 1.71%.

How company insiders have behaved in the face of the batflu, however, has been bullseye instructive.

To wit – over the last half year the TGT executive and directorial branch have unloaded in excess of $50 million worth of stock, amounting to 29% of their total hoard.

And better than $35 million of that sum came in August and September as the stock topped.

So there’s that.

Give you confidence?

Now look at the chart –

Overall, it’s toppy action, led by –

  1. An overbought RSI read in mid-August (in red),
  2. Followed by strong negative divergence against price from both RSI and MACD indicators (in green) – a sign that buyers are increasingly giving up dominion over the stock to sellers.
  3. A large gap that needs to close to $138 (in blue),
  4. A simple Fibonacci retracement calculation that would bring her down to $133,
  5. A rising trendline (in red) that’s now passing $139, and
  6. A rising 137 day moving average (in light blue) that will likely arrive at the target area – $138 – over the next couple of weeks.

The trade is speculative and is designed to profit from a relatively small decline.

And it goes like this –

A Jew and His Money recommends you consider selling the TGT October 16th 155/157.50 CALL spread for a credit of $1.50 (5.60/4.10), and using those funds to purchase the TGT October 16th 155 PUT for $1.77.  Total debit on the trade is $0.27.

Rationale: Again, the immediate technical picture for both the broad market and the stock is negative.  We need a decline over the next two weeks to TGT $154.73 to break even.  That’s a pullback of precisely 2.7%.

And we like those odds.

The short CALL spread pays for the majority of the PUT (which we also like), and limits our loss on the trade to exactly $2.77.

Maximum gain is unlimited (though time isn’t).

And it’s because of the time factor that we’re labeling this one SPECULATIVE.

Wishing you a tidal wave of good luck – and plenty of October stock market pessimism!

With kind regards,

Hugh L. O’Haynew

 

“Our aim is not to do away with corporations; on the contrary, these big aggregations are an inevitable development of modern industrialism. …  We are not hostile to them; we are merely determined that they shall be so handled as to subserve the public good.  We draw the line against misconduct, not against wealth.”

– Teddy Roosevelt

3 responses to “Wealth, Fine. Misconduct, No. (TGT)”

  1. M T says:

    Love the setup. Got two 155s against the spread for an all in cost of 4bucks per.
    Also proud owner of the 157.50 put against the spread for -28 credit all in as well…

    Well poised for a bad couple weeks for retail – BBY, TTC, TGT. Go October go!

  2. Hugh L. O'Haynew says:

    bs’d
    MT —
    Not sure how to parse the latest craziness across the market.
    Didn’t get that flimsy retail we were expecting.
    But we still hold that a spill is in store.
    Hold fast, all you true believers!
    From the belvedere, it looks like a tidal wave is approaching.
    Get yer life raft!
    Huey

  3. M T says:

    THIS ONE IS FOR ZELLERS!
    -100 TGT @166.07
    -1 Nov 155 put

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