At least one bit of good news came out this week: the weekly jobless claims total was lower than expected.
Last week, the jobless claims total was released at the same time as the Bureau of Labor Statistics’ (BLS) labor report, and the numbers were contradictory. Though the economy supposedly added 4.8 million jobs, there were over one million unemployment claims.
Unemployment data is noisy though, and the positive surprise this morning may give investors a little more confidence going forward.
But still, the number of newly confirmed cases of COVID-19 continues to surge higher. Traders keep wondering how the reopening of the U.S. economy is going to be impacted. Are businesses that were closed during the shelter-in-place orders going to reopen? At what capacity will they reopen? Will consumers come to those businesses?
We’re taking a different approach with today’s trade. Instead of looking at those companies that are reopening, we’re looking at a company that has remained open throughout the pandemic as an essential business: Target (NYSE:TGT).
TGT’s consistent profitability makes it the perfect target for a new put write.
A Buoyant Stock and Bullish News
As we mentioned above, the unemployment numbers that came back this morning were positive. Not only were their fewer unemployment claims than expected — 1.314 million versus 1.39 million expected — the number of continuing claims dropped by 698,000.
Now, these numbers will likely be revised — as we said, the data is noisy — but this is still positive news for consumers. Retailers may not be doing well, but a discount retailer like TGT that doubles as a grocery store?
That’s a stock that will benefit from a stronger consumer.
And during the pandemic, TGT has proven that it can adapt and remain profitable through uncertain times. We anticipate that whether states start to lock back down or remain open this month, TGT is going to remain buoyant.
TGT Will Consolidate Until Earnings
The stock is currently consolidating between support at around $115 and resistance at around $124. We expect TGT to remain in this range in the run-up to the company’s earnings announcement on Aug. 19, before market open.
Daily Chart of Target Corporation (TGT) — Chart Source: TradingView
If you’re looking for a strike price for your put, TGT’s support level at $115 would make an excellent choice.
When picking an expiration, the most important thing to consider is TGT’s earnings report on Aug. 19. We’d recommend avoiding any expirations beyond that. In fact, you want to try to get an expiration with a shorter hold time that still offers a good premium. That way you limit your risk.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.