Save Big and Ring the Register on Target Corporation

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There’s some “ho-ho-hope” for Target Corporation (NYSE:TGT) investors in front of earnings and the holiday shopping season. But if you’re going to buy into the stronger storyline taking shape in TGT stock, try ringing the register using a bullish butterfly. Let me explain.

TGT Stock: Save Big and Ring the Register on Target Corporation

Shares of Target closed out the week on a high note, finishing up almost 3.4% for the five-day period. Behind the relative strength as the broader market succumbed to narrow losses, TGT stock benefited from a sector rotation into retail stocks accentuated by a “drop-until-they-shop” buying spree at Kohl’s Corporation (NYSE:KSS) after reporting better-than-feared results.

In hindsight of course.

The more important report however comes next week. TGT earnings are Wednesday morning as the company is scheduled to release it Q3 numbers. With a restructuring and sales strategy overhaul already in progress due to changing shopping habits i.e., Amazon.com, Inc. (NASDAQ:AMZN), investors aren’t expecting miracles, but there is hope nonetheless.

The whisper number for Target’s earnings is forecast to come in two cents above the official estimate of 85 cents which represents a slightly less Grinch-like decline of 18% from the year ago period.

And if bullish investors believe in the jollier technical-based narrative in shares of Target, maybe a couple seasons of giving will turn into additional market-taking propelled along by TGT earnings?

TGT Daily Stock Chart  

Source: Charts by TradingView

In front of TGT stock’s earnings release, by some standards the season for shopping has started early. Shares of Target last week reaffirmed a developing uptrend of about five months in duration following an elongated correction of around two years in length.

The strong reaction established a convincing third higher-low pivot which found buyers stepping in between its Golden Cross pattern and a drawn in up-channel line. From current prices my bulls-eye for upside in TGT stock is $65-$66 based on potential channel resistance and filling a prior bearish gap following its March earnings report.

TGT Stock Moderately Bullish Long Butterfly  

One moderately bullish spread in TGT stock viewed favorably given our expectations discussed above is the Dec $62.50/$65/$67.50 call butterfly for up to 45 cents.

Risk for the butterfly position is limited to the initial debit paid and allows for a potential (perfect world) gain of $2.05 or 456% at expiration if Target shares land squarely at the sold $65 center strike.

Given our view of TGT stock having decent, but limited gain potential towards $65 to $66, the bullishly positioned butterfly fits in nicely with the resistance zone and is a good deal more affordable relative to a call purchase or a vertical due to its countering and embedded vertical construction.

Bottom line though, while this is less-costly way to position long in TGT it comes with the price of not wanting too much upside appreciation or the trader risks losing the entire debit at expiration. But if you’re agreeable with our technical prognosis, the butterfly makes a good deal of sense while costing a good deal less.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2017/11/target-corporation-tgt-stock-ring-the-register/.

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