I’m about to triple my money on this retail stock : Trader
Some of the biggest names in retail are set to report earnings next week, and one trader is planning to trade one stock in particular.
AlphaShark’s Andrew Keene thinks TJX is on the verge of going higher, based on the options activity he’s witnessed.
“We’ve seen institutional order flow in the options market on odd calls of 82.5,” he said on CNBC’s “Trading Nation” on Friday. “That means someone thinks the stock can eventually break above that $82.50 level.”
The retailer was touted as one of the industry’s top performers of the year, although other big names suffered. TJX is currently up 15% this year and, based on the charts, Keene sees the rise continuing.
Looking at a daily chart from TJX, Keene points out that each time the stock has moved closer to its 50- or 100-day moving average, buying activity has increased to drive the stock higher.
But TJX’s weekly chart is even more promising, showing upward momentum since the start of the year.
“It’s as clear as you can get on a bullish channel,” Keene said.
How far can the TJX go? Keene is betting the stock can reach $85.
“Knowing that earnings are rising, knowing that the institutional order flow in the options market leads me to believe that TJX can reach $85, I think it’s going to break above the $82 level,” he said. declared. “It will act as a new support in the future.”
Keene will buy the August 82.5 strike calls and sell the August 85 strike calls for 80 cents per share. If TJX does rise to $85, each spread bought for 80 cents will be worth $2.50, which means Keene would more than triple his money.
TJX Companies is expected to report results on August 16. Overall, Keene forecasts a strong earnings quarter for the retail sector.
“I think a lot of retailer names, despite Kate Spade having low incomes, are making progress. ROST [Ross Stores] is another that we see circulating the institutional order,” he said. ” I think [TJX will trade at] $85 by August expiry and I think earnings are going to be a catalyst.”