Restocking begins and Costco will be part of the solution

I would expect that many in the northeast part of the U.S. have begun the process of putting their lives back together after super-storm Sandy. Part of this process involves replacing those things that were lost/destroyed/ruined by the storm.

One company that I would expect to benefit from this is $COST given its offerings of clothes/food/electronics/etc. With that in mind, let’s take a look at the Daily chart to see how it is setting up:

At the moment, a Wedge has formed and price is currently heading into the apex suggesting a nice move soon. The measured move of the wedge base is $11 so this gives a down target of $87 and an up target of $109. Here are a few trade ideas:

  • If Bullish, and I am, consider buying a December 100/105 Call Spread (CS) and financing this by selling a November 90 Put. Once this Put expires (next Friday) choose a RED day to sell the December 90 Put (assuming that price has stayed above the $95 level, further reducing the cost of the original CS).
  • If Bearish then consider buying a December 95/90 Put Spread and finance this by selling the December 100/105 Call Spread (this way your risk is defined to $5).
  • If Bearish then consider buying a December 95/90/85 Put Fly.

 

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