Collecting Premium From Retail Stocks Like Target

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This morning, we are recommending a bullish put write on Target (NYSE:TGT).

It’s a great time to be trading on Wall Street, but while the S&P 500 is close to its prior highs, we need to be careful about adding new positions. Consumer stocks are performing well in this economy, and today, we’d like to get some exposure with a trade on TGT.

Consumer spending has steadily increased over 2019, and a position on TGT lets us take advantage. Still, the biggest story on the market now is about U.S.-China trade. We selected TGT for a bullish trade because any potential improvements to the trade situation will benefit the stock.

Hoping for Progress on Trade

Discount retailers like TGT have the potential for additional upside if this week’s meetings between President Trump and Chinese President Xi at the G20 summit show signs of progress. That event starts on Thursday, and news could arrive through the weekend if talks are productive.

Although we have tempered our expectations a little, we still assume the pressure on both sides to make a deal puts the odds of a positive outcome in our favor.

We don’t expect a lot of upside in the market before earnings season really kicks off in the middle of July, so entering a position with a short put is ideal. This allows us to retrieve a great return even if prices remain flat in the short term.

Support Emerges Amid Technology Struggles

If we look at the daily chart below, we can see that TGT pulled back slightly last week, but new support just above $85 emerged. The pullback came after cash registers in Target stores across the U.S. crashed on Saturday, June 15. Customers across the country couldn’t check out for about two hours.

Daily Chart of Target Corporation (TGT) — Chart Source: TradingView

TGT’s spokesperson said the outage was the result of “an internal technology issue” and there wasn’t an underlying security issue. Something similar happened five years ago, and investors seemed concerned. The stock dropped as a result.

While the incident was unfortunate, support emerging at $85 is a positive for the stock. It shows TGT might be able to weather other bad news, and $85 might even be a good level to use as a strike price for a put write.

After the outage, TGT’s CEO reaffirmed that the technology issues won’t affect its earnings forecast for the rest of 2019. And given the trends in consumer spending and TGT’s technical picture, we’re confident the stock will continue to rise in the short term.

To find out which TGT puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today. 

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of, as well as the co-editors of Strategic Trader.

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