COST
Good time to buy Costco (COST)Weak buy signal with the red+blue cross underneath the Kumo, and lagging strand is showing consolidation. This typically means "wait for more information" but we are approaching a strong support in the trend channel and momentum is pointing towards a reversal.
I'd keep a stop loss around the 238 level, but even if we unload at 247 that's a solid 3:1 risk to reward ratio.
Expect Costco to open on a good noteThe Megalodon Indicators are signifying a strong buy come market open for Costco! This indicator is incredibly accurate! If you'd like to know how to try it out for yourself, just send me a message!
COSTCO... another Amazon's victim? Last reporting data was ok, net sales for the quarter increased 10.8 percent, to $32.28 billion from $29.13 billion last year. Net sales for the first 24 weeks of fiscal 2018 increased 12.0 percent, to $63.40 billion from $56.60 billion last year.
The Company gained an incremental sales day in the quarter due to the shift of Thanksgiving, however pre-Thanksgiving and Black Friday holiday weekend sales fell in the first quarter this year, versus the second quarter last year. This negatively impacted this year’s second quarter sales by approximately 1.4% in the U.S., and slightly less worldwide and negatively impacted E-commerce sales by approximately 7-8%.
However, my expectation for COST is around $220.00, even after rose $170 per share at the end of 2018.
Have a Good Trading Week,
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$COST Costco at Key Support Level$COST Costco tagging key $200 support level today looking very oversold. Expecting a price recovery into the 1st quarter of 2019. Note there is an un-filled gap below $200 from June of this year - could see us dipping as low as $198 this week. A close this week below $198 would be bearish - ideally we stay above $200.
Targeting mid-December overhead gap-fill of ~$226.50 by mid to late February leading up to March earnings release.
Note: Informational analysis, not investment advice.
COST OverpricedSurprised that COST hasn't fallen farther AH, revenue growth is nice but gross income actually went down Y/Y. Net income increase is strictly from the tax cut and one time events.
31x P/E
1% dividend
When the recession hits, this will get cut in half easily. P/E ratio is way too high, dividend yield too low.
No active position yet, let's see where it opens tomorrow. Holding XRT puts though, expect a retail reaction to Costco earnings, we'll find out tomorrow morning.
THE WEEK AHEAD: ADBE, COST EARNINGS; OIH, XOP, UNG DIRECTIONALSPersonally, I'm not doing a ton here beyond looking at cleaning up remaining December cycle setups and evaluating whether there are poo piles that should be looked at for the taking of tax loss in the margin account before year's end. Nevertheless, here's an outline of what's potentially playable in the coming week ... .
ADBE (81/49) announces earnings on Thursday the 13th after market close. The 20-delta, January 18th 210/270 short strangle is paying a whopping 8.05/contract at the mid price, with the 25-delta January 18th 215/220/265/270 paying greater than one-third the width of the wings at a mid price of 2.13. Markets are showing quite wide at the moment, particularly in the defined risk setup, however, so it may prove unattractive at New York open from a liquidity standpoint.
COST (76/31) also announces on Thursday after market close, but the background implied isn't generally what I'm looking for in an earnings-related volatility contraction play (generally, >50% is where I draw my "picky line").
On the exchange-traded fund front, petro leads the pack, with OIH rank/implied metrics coming in at 95/47, XOP at 79/44, and UNG at 72/86. With OPEC reaching an agreement late last week as to production cuts, I lean toward bullish assumption setups with time to work out/reduce cost basis, since it will take awhile for any cuts to appear in the pipeline. For example: an XOP June/Feb 25/34 upward call diagonal,* 6.55 debit/contract, break even at 31.55 versus 31.54 spot, max profit on setup of 2.45, 72.8% debit paid/spread width ratio. I'm already in a similar OIH bullish assumption setup, which is proving to be a "pulled the trigger" too soon type of thing. The back month in the OIH setup is in April, so I've still got time to reduce cost basis and for the trade to work out in some fashion, even though it's a bit of a rough sled here.
With UNG in particular, I continue to look at a bearish assumption seasonality play, but markets on any given setup have been ugly wide, no matter what type of setup I seem to look at, and lack of liquidity is not your friend when doing an options setup.
For broad market premium sellers: SPY (47/30), IWM (78/25), QQQ (69/27).
* -- Buy the June 25, sell the February 34.
Short COST (Ready to get "Targeted"?)Weekly indicator trendline support broke, divergence, will drop on ER big move.
TP at least 183
[COST] It's starting phase 3Despite the price is over the 30MM, I think it's starting a phase 3. RSI is going down and the strong fall 3 weeks ago is felt.
COST: High Risk for Long Term BuyConsidering your risk is something that all investors and traders should do before trading or investing in any stock. Often when a stock displays this much risk on the long- and intermediate-term time frames, it also warns of risk for short-term trading as well. The Weekly Chart provides better perspective of the risk of buying the stock at this new all-time high price. There is no support nearby. See how many points are at risk if a correction occurs?
Trade Wisely,
Martha Stokes, CMT
THE WEEK AHEAD: PEP, COST EARNINGS; EWZ, CRON, NIO, IQ, MJPEP announces earnings on Tuesday before market open; COST, on Thursday, after. Neither presents a particularly compelling earnings announcement-related volatility contraction play, with PEP's rank/30-day implied coming in at 30/18, and COST's at 35/23.
With Brazilian elections taking place a week from today (October 7th), it seems to me that an EWZ play is in order if you haven't already got something on: the November 16th 29/39 short strangle is paying 1.59 at the mid with break evens around one standard deevy -- 27.41/40.59. You can naturally go with an October setup, but implied was over 20% higher out in November (44.0% versus 53.2%) as of Friday close, so you're likely to get a little more juice if you go a touch farther out in time.
On the exchange-traded fund side of things, EWZ comes in at the top of the board, with a rank/30-day implied at 79/50, followed by USO at 65/28, and GDX at 50/27.
Non-earnings high implied: CRON: 71/124; NIO: ~/106; MJ: ~/68.0, and IQ: -/61.4.*
Broad Market Majors Background 30-Day: QQQ: 17.2%; IWM: 15.0%; DIA: 13.6%; EFA: 13.3%; SPY: 11.8%.
* -- Neither NIO, MJ, nor IQ have been around for 52-weeks, so they don't currently have a 52-week range to evaluate. I would note that the options liquidity for MJ isn't the greatest, but figured I would throw it in there since weed is hot, and not everyone enjoys paying the single name roller coaster. The MJ November 16th 40 short straddle is paying a whopping 7.45 at the mid, with break evens at 32.55 and 47.45 ... .
Bitshares on sale today!There's a lesson to be learned every day! For me the lesson is: always "cost average" into a position. I was too lazy to ladder in, so I bought at the .618 retracement, and unfortunately we dipped deeper.
Putting it more correctly: unfortunately for me, because for those who didn't buy Bitshares is on sale today! We've briefly dipped below the long-term support trendline, most likely to go to the .886 retracement. Given the low low low RSI's we're seeing on multiple timeframes today.
I think you need to be blind not to scale into BTSBTC at the moment so if you ask me: start accumulating, and set your stop loss right at the 100% retracement, then move up the stop loss as soon as price goes up for a free trade.
$COST Over-extended on Weekly Chart$COST Costco looking over-extended on the weekly chart, appears to be holding within the upward channel limits. Valuation getting a little rich compared to industry average (P/E almost 50% > industry average).
Assuming this trend line holds, Costco could be overdue for a correction back to the area of the 50d ema or ~$190 by next ER (Oct).
Note: Observation/opinion, not investment advice.
THE WEEK AHEAD: HPQ, COST, XOP, OIH, EWZ, IWMHPQ announces tomorrow after market close; COST on Thursday after market. Neither underlying's rank/implied vol metrics are particularly compelling, however, with the former's implied at 29.6%, the latter at 23.5%. Even so, the 68% probability of profit, ~20 delta COST June 15th 188/207.5 short strangle's paying 2.31; managed early (<50% max), that could make for a nice winner. The only thing that makes remote sense in HPQ is a short straddle, with the June 15th 22 paying a paltry 1.29; early management at 25% max would yield a .32 winner.
As far as non-earnings single name plays are concerned, here are the top five underlyings ranked by background implied volatility: TSLA (47.8%; rank 31.1%), P (47.5%; rank 1.4%), RIG (46.2%; rank 11.1%), X (43.2%; 19.9%), and TWTR (40.5%; 15.2%).
TSLA, with the highest background implied of the bunch, is paying out 9.38 for the 69% probability of profit July 20th 235/325 short strangle camped out at the 17 delta strikes, with its defined risk counterpart, the 225/235/325/335 paying 2.57 at the mid, with a less than ideal payout of less than one-third the width of the wings.
In the exchange-traded fund arena: XOP, OIH, and EWZ round out the top-implied volatility symbols, coming in at 34.8%, 31.8%, and 31.5%, respectively.
The XOP July 20th 37/45 short strangle is paying 1.24 with a probability of profit of 68% with break evens at 35.75/46.25; the 41 short straddle -- 3.97 with break evens at 37.03/44.97. With the short strangle, I'd be shooting for 50% max (.62); the short straddle, 25% max (.99).
The EWZ July 20th 37 short straddle* is paying 3.47 with break evens at 33.53/40.47; the corresponding iron fly with the longs camped out at ~10 delta -- the 31/37/37/43, pays 3.14 with risk one to make one metrics (max loss of 2.86 versus 3.14 credit received).
Lastly, a directional short idea in IWM, pictured on the chart. The setup is a Poor Man's Covered Call or "downside put diagonal." Here are the metrics: 7.23 debit, max loss on setup: 7.23, max profit on setup: 4.77/contract, break even on setup: 161.77, debit paid/spread width ratio: 60.25%. Max profit is realized on finish below the short at expiry, but I'd look to take profit early at 20% of what I put the trade on for (.2 x 7.23 = 1.44), rolling the short put out "as is" on significant decrease in value.
* -- My recent tendency has been to go with the short straddle/iron fly in underlyings <$50, bringing in more credit at the door and then proceeding to "manage early" (at 25% max).
COST Daily Bullish bat patternIt's been a while since I posted COST idea last time as it didn't really give any great daily set-up.
In terms of this daily bat, the pivot isn't the perfect one as it didn't make new high afterwards, so a nice reversal sign near 178 is necessary for this trade!
I like to turn to retail consumers sector when it comes to market fluctuation, it won't hurt as much when the market pulls back and it can follow the market's rally.
Let's see how it goes!
THE WEEK AHEAD: TGT, ANF, COST, XOP, OIH, FXIA trio of retail names, TGT, ANF, and COST announce next week ... .
TGT announces on 3/6 before market open. Preliminarily, the March 16th, 11-day, 20-delta 69.5/81 short strangle pays 1.54 at the mid, with its defined risk counterpart, the 66.5/69/81/84 iron condor paying under 1/3rd the width of the wings at .83/contract, slightly shy of the credit I like to receive on those to pull the trigger.
For those into the short put/acquire/cover cycle type trade (I'm going to refer to these as "spack" trades for short):* the 30 delta, March 16th 71.5 short put is paying 1.37 at the mid, which would yield a cost basis of 70.13 of any assigned shares, a discount of 6.7% over where the underlying is currently trading.
ANF announces on 3/7 before market open. Given the size of the underlying, I'd probably go short straddle, with the March 16th 21 paying 3.22 at the door and its defined risk iron fly variation -- the 17/21/21/25 paying 2.56, slightly greater than 1/4 the width of the long strangle component of the setup, which is what I want to see at the least out of an iron fly.
The "spack" trade: the March 16th, 30 delta 19 short put is paying .91/contract, yielding a cost basis of 18.09 in any assigned shares versus 20.68 market, a 12.5% discount.
Lastly, COST announces on the 7th, after market close. The March 16th 177.5/200 short strangle is paying 2.40, with the defined risk 172.5/177.5/200/205 paying 1.21, somewhat short of 1/3rd the width of the wings.
The spack trade is to sell the March 16th 182.5 for 2.31/contract which would result in a cost basis of 180.19 in assigned shares -- a 4.8% discount over where shares are currently trading.
Sector-wise, the volatility remains in a familiar place, with XOP/OIH having the highest (34%). FXI (29%), XRT (27%), and XHB (26%) follow in descending order, with background implied a bit on the light side (I like >35% to bother).
Depending on your thoughts about where petro is heading: The XOP April 20th 31/37 short strangle is paying 1.01 at the mid (neutral assumption); the April 20th 32 short put (bullish assumption) is paying .74 with a resulting cost basis of 31.26 (an 8.4% discount over current share price); and the Plain Jane slightly monied April 20th 34 covered call (buy shares at 34.14, sell the April 20th 34 short call) costs 32.50 to put on (a 4.8% discount over current price) (selling the April 20th 34 short put for 1.47 yields basically the same metrics).
The FXI April 20th 44/51 short strangle is paying 1.41 at the mid, with the spack trade being to sell the April 20th 45 put for a .94 credit, resulting in a cost basis of 44.06 per share, a 6.8% discount over where the underlying is currently trading.
* -- Generally speaking, the cycle is to: (a) Sell puts. At expiry, if price is above your strike, you keep the premium. (b) If at expiry, price is below your strike, either allow yourself to be assigned, or roll the short put out "as is" for credit and therefore further cost basis reduction. (c) On assignment, proceed to cover your shares by selling calls against at or above your cost basis in the shares, looking to exit the trade profitably.
October 5 Earnings: Costco- Will eCommerce Ware Off Competition?Costco reports on Thursday, October 5th after the closing bell.
Heading into earnings, the company has a fairly straight forward R/R portfolio:
- Costco enjoys being a major retailer in the US with a wide array of products in multiple markets.
- The company's eCommerce capabilities are picking up steam and contributing meaningfully to revenue. eCommerce global expansion is aiding sales growth.
- Costco's membership club is expanding and drawing in customers in the US and globally.
- The overall market is a fierce competitive one, with giants like Wal-Mart $WMT and Target $TGT, among others, fighting for every consumer.
- Consumer spending, although picking up from highs, remains at a sluggish growth rate, hurting industry prospects.
I believe the pros will outweigh the cons for the expected quarter and Costco will beat expectations.
Starting Costco with a $178.00 Price Target for the post-earnings price action.
THE WEEK AHEAD: COST, BBRY, TEVA, MATEarnings
COST announces earnings on Thursday after market close. With a background implied volatility of 21%, it doesn't meet my basic earnings play sniff test, but naturally that can increase running into earnings, so it may be worth keeping an eye on.
Preliminarily, the Oct 20th 158/170 short strangle currently pays 2.21 at the mid with break evens around the 1 standard deviation line for both sides. The defined risk version of that play, a 155/158/170/173 iron condor, brings in 1.00, with break evens wide of the expected on both sides. (I looked at using the Oct 13th expiry to take maximum advantage of any vol contraction post-earnings, but strikes where I would want to set up my tent were less than ideal).
Non-Earnings
Post-earnings, BBRY implied volatility remains fairly high at 46.25%, placing it in the upper one quarter of the where it's been over the past 52 weeks. Given the size of the underlying, the only play that makes sense from a nondirectional standpoint is a Nov 17th 11 short straddle, which is paying 1.24 at the mid with break evens at 9.75 and 12.25.
The generic drug maker TEVA's implied is at 51.31%, which is around the middle of its range over the past 52. It's not quite where I'd like to see it, and the Nov 17th 15/20 short strangle is only paying .80 at the mid with break evens short of the 1 standard deviation line In contrast, the Nov 17th 17.5 short straddle is paying 2.46 with break evens wide of the expected on both sides, but the comparable iron fly -- a Nov 17th 12.5/17.5/17.5/22.5 only pays 2.20, short of the one-quarter of the width of the longs I like to get out of those. For those looking to strategically acquire shares or to just sell directional premium, the 30 delta Nov 10th 16 short put is paying .52 at the mid with a break even of 15.48.
Toy maker MAT has the right rank/implied metrics here, but with earnings a mere 17 days out, the preference is wait to put on a play shortly before earnings to take maximum advantage of vol contraction.
Exchange-Traded Funds
These are my bread and butter trades, but there's little bread and no butter here. The highest implied volatility exchange traded fund is EWZ at 31.43%, but it's in the lower one-fourth of where it's been over the past year. GDXJ follows with 29.93%; XOP, 25.96%; GDX, 23.25%; and OIH, 24.21%, all at the bottom end of their ranges and, in any event, below 35% implied generally.
VIX et al.
VIX finished Friday at sub-10 levels and its "little buddies" (VXX, UVXY, SVXY) continue to be cannibalized by contango. Sit on your hands for any VIX "Term Structure" trade (the first /VX future trading at >16 is in April) and wait for a VXST/VIX ratio pop to greater than 1.15 (Friday finish: 83.6) to put on plays in VXX, UVXY, and/or SVXY.
HOW TO MAKE MONEY WHEN ALL SPECULATORS ARE LOOSING First of all, this is a long-term investing style, if you are not that kind of person then it’s not for you.
Let’s say you can spare $500 a month.
By allowing dollar cost averaging into just 3 index funds, $300 into one that holds total US stock market, $100 into once that hold foreign stock market and $100 into one that hold US bonds – you can say you hold almost every investment in the world that’s worth owning.
Every month you buy more
If market has dropped your present investment now have more value, so now you buy more shares than before
If market goes up your money buys you fewer shares
By making this strictly disciplined investment at start of every month, you prevent your emotions from putting more money in market when market is very high ( and it’s very overvalued) and refusing to buy more after market has crashed and now ( things are cheap but for speculators now it’s risky)
According to Ibbotson Associates, the leading finical research firm, if you invested $12,000 in s&p 500 stock index at beginning of SEP 1929, 10 years later you would have only $7224 left but if you started investing $100 every month then buy August 1939 you would have made $15,571.
THAT’S THE POWER OF DISCiPLINE BUYING AND EVEN IN FACE OF GREAT DEPRESSION AND WORST BEAR MARKETS (2007).
YOU CAN MAKE MONEY WHEN ALL OTHERS ARE LOSSING, PROVIDED THAT:
1. YOU INVEST IN INDEX FUNDS ( FOR DIVERSIFICATION) NEVER INVEST IN A SINGLE STOCK
2. YOU DO INVEST NO MATTER WHAT AT START OF EVERY MONTH
3. HAVE ATTITUDE TOWARDS MARKETS OF “I DON’T KNOW WHERE IT’S GOING AND I DON’T CARE”
Reference: the intelligent investor by Benjamin graham
www.booktopia.com.au
