Target, Walmart or Amazon?

Watching one of my favorite shows this afternoon on CNBC, they played a game, Would you Rather with Target, Walmart or Amazon. I found their discussion interesting as many of them picked Amazon, or Target over Walmart. Since they didn't ask me, I thought I would write my 2 cents.

I feel there is one winner as the other 2 are trying to catch up. The analyst on the show stated that Amazon will try to squeeze profits from Walmart and Target. I don't think they account for the high over head cost Amazon has between delivery, warehouses and employees to run those locations. Amazon clearly doesn't have the overhead of running a retail location, but that is nominal when you consider a couple other factors that retail locations allow.

Retail locations allow people to feel, touch and try. You can't get that experience online. Retail locations also have the ability to take cash and food stamps that you can not do on Amazon's website. When people use other forms of payments including food stamps, many times they buy other things in addition to food. This ultimately leads to the realization that Amazon does not cater to low income families with make up a large percentage of households in the United States.

Amazon might be a better play if you consider their business web services and video services. However, Amazon has increased the price of their Prime membership to increase profits while shrinking delivery times by a day. While Amazon collects a monthly fee for their services, Walmart provides the same delivery service with no membership.

Each company has spent money in the past couple of years to improve. Amazon bought Whole Foods for a retail food presence that also expands their Prime Membership reach for great synergy as Whole Foods caters to a more affluent customer. Target spent money to improve their stores in the past year, but I didn't really see a difference. Walmart on the other hand spent money to acquire Flipkart which is the leading online retailer in India, the 2nd largest country by population in the world. So each company has spent money to expand their businesses rather than wasting on share buybacks.

From the investments the companies made, I believe Walmart's purchase of Flipcart was the most aggressive that will benefit them the most in the long run. Walmart already has a great online presence so adding Flipkart jumped them in front of Amazon in India. Flipkart's synergy is great as Walmart's website is a marketplace where a variety of sellers also sell products like Amazon.

In addition, Walmart also has it's own brand of products they sell for a higher profit margin to comparable name brands on the shelf. And Walmart even sells low cost value based items in that are similar to what you could get at a Family Dollar, Dollar Tree or Five Below. I do realize that Target does similar things to Walmart, but ultimately Target appears to be a different version of K-Mart which eventually disappeared.

To avoid the fate of K-Mart, Target needs to improve their online presence to the point someone wants to use their app to search for things first like Amazon and Walmart. Target must create a marketplace for other sellers so their may profit from seller fees. Target must also improve their value based presence. To me, there are too many things that Walmart already does well that Target isn't in the same league as Amazon and Walmart

All factors considered, I believe Walmart is the best bargain for your investment dollars of the 3 with Amazon in a close 2nd due to their server business. Amazon could get in front of Walmart if they were to take advantage of a major retailer going out of business like Sears or JC Penny's who have locations and their own brands.

Movement to Profit

Most stocks opened higher this morning with the exception to Alphabet (GOOGL) which was targeted by President Trump before the market opened because he was not happy with the "fake news" he found when he Googled himself. I guess he doesn't understand that Google includes what you are interested in the search.

It fell so quickly and bounced from it's morning bottom that it would have been difficult to profit from Put Options this morning. It did bounce off 1246 which is $10 lower than Monday's close. That is where you could have bought a Call Option and sold it around 11am when it came close to even for the day. Unfortunately this was the only good move to trade based on the indicators.

Best Buy reported earnings around 7am this morning and it beat all of the numbers analysts were expecting, but it quickly traded down due to a lower forecast for the current quarter. Best Buy did raise their forecast estimates for the year which appeared to be ignored.

Best Buy popped early and sank quickly. It appeared to have bottomed at $75. Based on the last earnings report, it went down further the 2nd day after reporting earnings. I believe that it might not go lower tomorrow because the earnings report was so good.

I would like to buy Call Options 3 weeks out once the bottom is secure. As we saw with Alibaba retested it's bottom the 2nd day after earnings last week, it moved up and opened at 182 today but sank hard after that. I don't believe in Alibaba like I do with Best Buy so I would expect Best Buy will retest it's recent all time highs in the next couple of weeks.

Tesla went down from open and bottomed quickly at 311, ran up to 317 and down for the rest of the day finishing at 311. I just saw one good Call Option trade that made sense.

Given that Amazon had a new high today, I would expect to see more upward movement tomorrow if we don't get another tariff bomb dropped by President Trump before the market opens. 

Everything Good but Banks Today

• Today the big banks reported earnings before the market opened. Wells Fargo disappointed  Citigroup was lame and JP Morgan was held back by the others despite producing great numbers. Retail stocks were up lead by Home Depot and Best Buy. Boeing shot up, came down to where it started and ran up for the rest of the day. 
  
• The FANG stocks were good with the exception to Netflix like yesterday. Amazon and Alphabet (GOOGL) opened above their all time high that was set yesterday. Amazon was consistent going up for most of the day while Alphabet went down initially and made a turn at 10am to shoot higher. It took another turn about mid day that would cause it to go negative but turn around at 1200 and finished the day positive. There were some nice trades that you could have profited from if you followed the technical indicators as shown on the chart below.
  
• Amazon Prime Day is next week and I would expect to see Amazon and Alphabet go higher on Monday and Tuesday with a possible turn around on Wednesday afternoon. I think Netflix will reverse higher as it seems to do every time someone has something negative to say about them. 

Monday Market Crazy

• The Market opened higher today,came back a little before heading higher. The banks are the first to report quarterly earnings for the second quarter on Friday so this movement is due to the strong labor numbers from last Friday. I would expect to see the Nasdaq hit a new high this week before the market pull back on Friday. 
• FANG lead by Amazon, Netflix and Alphabet opened higher, had a minor pull back before pushing past the morning highs near the end of the day. If you didn't sell your calls in the morning around 9:50am, you would have had to wait until 3:55pm to sell positive which was still 2 less than this morning. This morning was difficult to find the peak because so many different stocks gave different indications even within FANG.
• TRADE: If you were following Alphabet (GOOGL) you would have seen it open higher than Friday's close and come down a couple of points. There was the first buying opportunity for Call Options. It shot up to 1162 before coming back within a point of it's open by 9:40am which gave the 2nd opportunity to buy Call Options. It shot up to 1166 by 9:55am which presented the best selling point this morning to get out because it retraced back to where it started, but never went negative for the day. I prefer making money quick and wait for another opportunity so here is the way to play it without worrying about the afternoon. 
  
  
  
  
• LEARNING LESSON: When exiting one position that is cutting a loss, don't jump in to the opposite direction trade too quickly because it might not continue in that direction or might have run out of steam and might not move further. You are better to wait for another day or when the trading signals point to making a change. 
• ADVICE: Don't enter a new trade before 11am as you will almost always have another chance later. 

Thursday Market Went Up

• The stock market opened higher, came back some and continued higher in the afternoon. The market was lead by technology and banking stocks. Alphabet (GOOGL) was the bigger winner as it followed with the other FANG stocks, but never went negative like Amazon and Netflix.
• Alphabet opened up approximately 8 points and all of the FANG stocks were near the top on their stochastic indicators. Once again you could have bought Call options in the first few minutes on the pull back near where it opened, then sold when it peaked around 10am.
• The bigger buy was when it came back near where it opened around 10:40am and the indicators including Amazon and Netflix where down indicated they were going up. I made good money using this strategy buying Call Options on GOOGL with a strike price of 1130 and selling near the top from 6.55 and out at 13.19. I should have put my limit order for 14, but wanted to make sure I kept my profit.
  
  
  
  
  
  
  
  
  
  

Positive Ending to the First Half of 2018

• Yesterday after the market close the Fed Stress Test results came in favorably for almost all banks. Thankfully when the banks are up, Amazon and Google go up too and I trade Alphabet (GOOGL) options primarily.
• Alphabet was poised to open $6 higher than yesterday's close. So I watched it go up and then come down in the first 10 minutes which showed me that it was going up to start the day so I jumped in buying 5 Call options with 1137.50 strike price. It quickly ran up to 1141 where it stalled. I was quick on the trigger after missing on $500 yesterday and sold for a max profit. See illustrations below:
  
• From selling my Call options at the top, Alphabet slipped down and came back, but didn't make a new high. That is where I bought a Put option. Unfortunately I sold it too soon as I made another $125, where if I had more conviction I would have held it a bit longer for a $400 profit.
• There is no guarantee with anything. I just try to make money based on momentum opportunities I see in the market with specific stocks. The option prices in Friday are the lowest due to the limited time they are good, but the opportunity to make a profit diminishes without momentum that is carried through the day. 
• Learning Lesson:  Never submit a Sell to Close at Market Price before the market opens at 9:30am. I bought back an out of the money call option on Best Buy with a strike price of 77 with the expectation that I could close the position out for under $10 because it closed on Wednesday for .06. When I looked at the transaction details I bought it back for $41 yesterday at market open. Best Buy ended the week below $75 and this option would have expired today worthless which would have saved me $41. I bought it back yesterday because Best Buy is a retail stock that moves with FANG many times and FANG was so low Wednesday that it was going up on Thursday. I expected Best Buy might have the possibility of going above 77 by the end of the week and I didn't want to chance it if I could close the position for under $10. MY BAD!

More Apple Pain and Higher Rates

• If you are day trading with options, I always recommend closing out your positions by the end of the day because when the market is closed you are stuck with what ever news or sentiment is rolling into the next day. Apple opened slightly down and fell like a rock within a few minutes. Trailing stops are important to lock in your gains and reduce your losses. When you are down by .50, get out and don't buy more.
• Yesterday the banks were up for most of the day while most things were not. Today they opened higher and fell without upward movement. Yesterday interest were up and was believed to be fueling the bank rally, but today the 10 Year Treasury Note hit 2.95% for the first time in a long time and the banks did not raise up. (JPM reference)
• Google experienced more positive ratings and it opened down, but came up sharply to 1094 before falling 20 points, coming up 10 and going back down for the afternoon. I would have expected it to rise more throughout the day along with Amazon since they report earnings next week and everything that we have heard so far is positive. I mention this because Google options may be expensive, but they move and when utilizing Scholastic indicator you should be able to time when to buy/sell a call or put option. There is good movement but not over priced options with ridiculous movement of Amazon. 
• Political news rattled the markets this morning with the Democratic Party looking to sue Trump's party along with Russia intelligence over the last presidential election. I would call this a sneeze when something political happens and the market as a whole moves down sharply. 
• Given that today was the third day in a row where the market was down, I would expect the stock market to open higher at open on Monday. Look for a pull back by 10:30am as an entry point. I am sure we will hear something about Apple demand being good and they are diversifying away from past suppliers to avoid tariff issues moving forward. Apple has bounced off this level a few times over the past couple of months.