CTO trade ideas
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.
$COSTJust support and resistance
im naturally long but $COST has some hurdles it needs to clear before breaking out...
COST breaking through the 200 MACOST broke through the 200 MA and recent resistance line which is pretty bullish. Look tomorrow for confirmation of continuation.
COSTCO SUPPORT LINES I make stock analyses before the opening, these levels i draw are strong support/resistance and are the most powerfull on the same day. So i use them the moment when the market opens
You can see somethimes i use 2 - 3 levels because i dont know where the market will open.
So how i use them, when the market open i see witch levels are still valid if it gaps above or under my level this one cannot used anymore.
When price does come close to my level i place a limit order.
time frame i use are 5-10 min candles if price close right under or below the level with few penny's its of the table ! my risk reward ratio is 2:1 would be good to use trial these are scalp trades in high illiquidity market conditions !
Costco DiscountI wish I had been paying closer attention to this especially during that failed high and Ghidorah deformed H&S.
Nice entry levels at failed high and breaking of lows after a bearish Island reversal
Paying attention to the 20D and if it "holds". Looks slightly bullish
Short Put Spread in High IVHigh IV in $COST
Sept 15 140/155 Put Spread for $2.03.
2x stop loss, 50% win mgmt.
COST cypher finally workedThe 150.90 buy finally got my 1:1 kick, so what's next is to trail the other half.
Adjusting the out from 141.99 to 151.44 may be a good idea as it's the latest HL and a protection for my cost (yes, my cost of COST lol)
86% probability trade on Costco (Ratio Spread)
After last earnings Costco had a 14% down move. If we take into consideration last year, we have a CVPOC at around $150 Price, and in the shorter term the VPOC is around $167 (2017). That means that those prices are the ones that have traded the most and considered fair for the stock.
With an IV Rank at 67 we can sell some premium, so given the down move I sold a 3:1 Ratio spread for $1.66.
This gives us a max profit of $665 at the $150 level and if it stays above $155 price we would be making $166 at expiration.
Our probabilities of profit are very high at 86%
The trade:
Sell (3) AUG18 155 PUT
Buy (1) AUG18 150 PUT
Buy This Costco (COST) Dip Before It Shoots UpCostco has been in an overexuberant decline since news of the Amazon and Whole Foods merger. Fortunately, this decline in the stock has brought it in-line with recent support levels and should begin to move upward once again. The stock has been in a consistent bullish trend since 2010. The recent decline seems to be part of the natural cycle for Costco. This cycle points upward next and also has other factors correlating to this move. On multiple occasions through the long bull trend, three of the technical indicators discussed below have been at similar levels in which they are now. These instances have resulted in gains for the stock. I have also conducted further analysis based on other historical information and readings that confirm a pending gain for Costco which are laid out below.
When we look at technical indicators, the relative strength index (RSI) is at 30.7171. RSI tends to determine trends, momentum, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. Currently the RSI is moving upward from recent oversold levels.
The positive vortex indicator (VI) is at 0.7644 and the negative is at 1.1780. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The positive and negative levels have been moving in a manner consistent with upward movement for the stock The stock and indicators had been bearish for the past three weeks, but that trend is starting to end.
The stochastic oscillator K value is 5.0897 and D value is 6.4898. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The stochastic well oversold and the stock should begin to move upward soon.
I have created an algorithm (called the SAG gauge) which signals when stocks are truly overbought and oversold. The algorithm indicates when a particular stock meets multiple criteria culminating in an oversold or overbought signal. That signal will occur within a few trading days after the stock has begun to move upward. Recognizing this movement and pending signal can increase gains by entering early.
Upon back-testing this indicator, it has signaled oversold status 25 times dating back to 1986. The stock always gains at least 0.75% over the following 35 trading days after the indicator date. Eighty percent of the time the stock gains at least 8.75% and seventy percent of the time gains 9%.
Since 1998, this stock always gains a minimum of 1.76% when the RSI, positive and negative VI are simultaneously at their current level and moving in their current direction. This additional study requires the stochastic at the bottom of the chart above to be oversold as it is today too. Ten similar instances were found. The median move is 15.20% over 20 trading days. The last two times the stock bounced off its support line (which it did on July 11), the stock has achieved a minimum gain of 8.30% over the following 22 trading days.
Three of the ten instances we just covered occurred at the same time or within days of an oversold signal on the SAG gauge. These instances resulted in a minimal gain of 6.10% and median of 16.25%.
Considering the RSI, VI, stochastic levels, SAG gauge and historical similarities, the stock should see upward movement over the short to intermediate time period. Based on historical movement compared to current levels and the SAG gauge, the stock could gain at least 6% over the next 35 trading days if not sooner.
$COST at 151 it could rebound from 149.92 $COST at 151 it could rebound from 149.92 or 45-degree at Gann's support
Here you are, COST cypherCOST is still under huge selling pressure after another downgrade by BMO on Monday, and as I wrote last week, I've waited quite a while for a good entry for the company.
Although I didn't really trade it,last week the BAT pattern failed as it gave such a small room for the stock to run.
While when the X @ 156.59 broke, it did give good short continuation to make it a great stop loss point.
And all of a sudden, here comes the cypher, a much better X point than the BAT last time.
This Cypher pattern suggest a 150.90 entry and a 141.99 out, about 6% risk. As it's being slumped so hard, I still won't just put my buy limit @ 150.90 to fight with the recent downtrend;
while if there is any potential reversal or retracement sign like hammer or inside day breakout formed here, I'm willing to give it a shot!
I do think that will be a very risky trade according to how the market slumped COST stock, while at least I think it worth the risk.
