October 23, 2018

Kohl’s Is Showing Strength In This Weak Market

Negative sentiment is being seen in the stock markets again as the Dow looked set for steep triple-digit losses and S&P 500 futures slumped 1.5% to a new low of 2715. The tech sector is under additional pressure after chipmaker AMS (OTCPK: AMSSY) plunged 27% as its outlook triggered alarm bells on a big day for corporate earnings. Broader forces may also be at play, amid Saudi Arabia’s diplomatic isolation, worries about Italy’s finances and a stalemate over Brexit.

*Source:  Seeking Alpha

Let’s consider Kohl’s Corporation. (Ticker: KSS):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on October 19th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to GREEN on that same day.  This indicator measures strength and weakness for a 48-hour period, in this case, strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  I want to play the VP bullish indication.

Strategy Discussion

If you are strictly a stock trader, simply buying KSS in the $72.00 area is a prudent move.  You are anticipating a move to the upside.  It is always a good idea to enter a sell-stop order to mitigate potential losses.  Placing that buy-stop in the $71.00 area will achieve that goal.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking a passive, premium credit approach may be the best path to success.

Because of the reasons given above, the sale of a credit put spread may be one way to approach this situation.  You want to collect as much premium as possible while at the same time staying within the bounds of your risk tolerance levels.  You may want to consider the KSS November 2nd weekly expiration 70/71 put spread, selling it for $0.35.  The most you can gain is the premium collected and the most you can lose is the width of the wider spread less any premium collected.  Max gain = $0.35 and max loss = $0.65.

This means that you are laying odds of 1.86:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

If you would like to learn more about the VantagePoint platform and take advantage of the exclusive offer that our clients enjoy, please visit:

https://discover.vantagepointsoftware.com/prosper-demo/

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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