Good research, nice thesis. Confused though as you seem bearish, yet you want to buy calls? Also, as I know you are somewhat new to the game, just don't play ER's, especially with options. It might work, but usually doesn't, IV crush. This is a game of taking risk with the best probabilities. You are probably right, but short shares if you really want to play er. AMZN er was a disaster also, missed on revenue and guided lower.BaylorSpineGuy said:
Here's an interesting play I'm likely buying tomorrow late or Thursday depending on options prices:
The Bear case against Costco (COST):
FA:
It certainly feels like a lot of the air has been taken out of the sails here as I suspect we near the end of this incredible bull run. Costco, in my opinion, is like a microcosm of the US economy. It has groceries, electronics, clothing, lawn furniture, games, television, phones, etc. It's quite comprehensive as a store. And it makes a good chunk of its profits on subscriptions. A lot of folks are speculating that their renewals are gonna go down with this report coming Thursday. My wife (who I consider the epitome of the American shopper, God bless her!) tonight told me she hasn't been shopping there as much these past few months. She really had no explanation except to say she's not buying snacks for the kids in bulk like she was during lockdown or something. Americans change habits from time to time and have no explanation. This company will always be solid in terms of cost of goods, etc., but I think supply chains are about to cut into their success as well. Supply chain issues are becoming increasingly painful and common. FedEx tonight got hammered on their report and fell more than 10 pts AH.
TA:
Evergrande is getting a lot of credit for Monday's debacle but I suspect that's just a popular narrative. People knew they were insolvent for months. I think Monday was a big distribution day, and volume was super high across a lot of sectors and companies. COST took a dump down $12 at one point before marching back toward the end of the day. Today, it gained back almost 1 pt on very low volume (likely retail thinking they bought the dip haha!).
If you look closely at the charts, the SPY and COST charts can be nearly superimposed on one another in terms of growth over the last year (save for a few minor pullbacks here and there). That's why I said this company is like a microcosm of our entire economy.
I digress. Investors have very little appetite for these enormous costs of stocks anymore. COST is $450/share! $45,000 to own 100 shares of 1 company. The average American investor can maybe afford a few shares, certainly not 100. Amazon had its best earnings report EVER recently and promptly tanked 400 points. There's simply no appetite for these highly expensive companies.
COST recently completed a H&S pattern and fell fairly well about 10 points. It's trying to bounce back right now and finds itself in a double top pattern (after falling nearly 10 points on Monday). Volume looks to support the downward trend. My guess is more bad news forces this stock price down significantly Thursday evening.
Conclusion:
I think the FedEx report from today is a harbinger of things to come. Supply chain woes and increasing costs are chipping into profits. My family is feeling it. I suspect we all are. Kroger recently reported their profits were cut because they kept prices down despite increasing costs. Who on Earth will see this stock shooting up Thursday AH?
I am not a nearly good enough technician to tell you which calls/puts to buy or sell and what price to bail or whatever? My plan is to buy ATM or near the money calls near end of day tomorrow or Thursday….a lotto so to speak with expiration on Friday.
I welcome all criticisms. Thanks and have a great night!