TGT

December consumer confidence to impact retail sector

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What's Happening

Retail is in focus with the holiday shopping season in full swing and on December 27 the market will see the December consumer confidence report. A strong reading will give retailers like Wal-Mart ( WMT ) a much-needed boost to end the year. WMT stock has fallen 11.5% in 2018.

Technical Analysis

WMT was recently trading at $87.28 down $22.7 from its 12-month high and $5.5 above its 12-month low. InvestorsObserver's Stock Score Report gives WMT a 57 long-term technical score and a 52 short-term technical score. The stock has recent support above $86 and recent resistance below $94. Of the 22 analysts who cover the stock 12 rate it Strong Buy, 1 rate it Buy, 9 rate it Hold, 0 rate it Sell, and 0 rate it Strong Sell, WMT gets a score of 48 from InvestorsObserver's Stock Score Report.

Analyst's Thoughts

Mega retailer Wal-Mart has struggled since reporting mixed numbers in November. Earnings topped estimates but sales were weaker than expected and the market pounced on the stock which continues to look for support. Wall Street is worried that a volatile stock market rising prices stemming from the trade war between the U.S. and China will have an impact on consumers, and traders will get a better idea of what consumers are thinking when December's consumer confidence numbers are released December 27. Should the report show strength big retailers like Wal-Mart and Target ( TGT ) that have struggled over the last month could finally find support and move higher through the remainder of the year. WMT is down around 17% from its November high, which has pulled the stock's forward P/E down to 18.3. Given the extent of the current selloff, a good reading on consumer confidence could help investors quickly make back some of the stock's recent losses. Analysts have a $107.48 average price target on the stock.

Stock Only Trade

If you're looking to establish a long stock position in WMT consider buying the stock under $87. Sell if it falls below $80 or take profits if it gets to $100.

Bullish Trade

If you want a bullish hedged trade on the stock, consider a 2/15/19 70/75 bull-put credit spread for a $0.25 credit. That's a potential 5.3% return (34% annualized*) and the stock would have to fall 14.3% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an 2/15/19 97.50/100 bear-call credit spread for a $0.20 credit. That's a potential 8.7% return (56% annualized*) and the stock would have to rise 12% to cause a problem.

Covered Call Trade

If you like the stock but wish to lower your cost basis on a new position, you may want to consider a 2/15/19 $87.50 covered call. Buy WMT shares (typically 100 shares, scale as appropriate), while selling the 2/15/19 $87.50 call for a debit of $83.78, per share. The trade has a target assigned return of 4.4%, and a target annualized return of 29% (for comparison purposes only).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on InvestorsObserver.com


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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