Is Target a Falling Knife or a Great Stock on Sale?

by | Jun 17, 2022 | Stocks

Before I head out on vacation, I want to discuss one of my favorite pairs trades… 

It involves two retailer stocks in particular, one of which I’m super bearish on that many of you may own because it’s a popular stock, so I figured it would be a good time to discuss it: Target. 

As I said, I’m super bearish on Target , even after it’s already fallen a staggering 45% in just two month’s time. Target Corp. (NYSE: TGT) was at $250 a share back on April 20 and by lunchtime Friday, it was sitting at $140. 

a Target stock chart (bearish on Target)

Target is generally a great stock so it’s probably a good time to buy, right? Wrong… Here’s the thing… 

Target can go so much lower. 

If we blow TGT’s chart up and look back, it was $100 a share just two years ago in 2020. 

A target stock chart (bearish on Target)

And we’re entering a recession, so it’s easy to see why I’m super bearish on Target. I see things getting really tight in retailers like this. 

Since I’m bearish on Target, let’s look at the other side of this trade… Dollar Tree Inc. (Nasdaq: DLTR). 

Dollar Tree gapped up and it’s been sinking again. BUT… it has a much better looking chart than Target, especially from a one-year perspective… 

Notice we have a bounce right at that 100-day moving average line and I think it’s back off to the races.

dollar tree stock chart (bearish on Target)

As I’ve mentioned before, think of these retailers as being in a pecking order, and stuff rolls downhill. Say you have Target at the top… Target shoppers are feeling the pinch of inflation, so they start shopping at Walmart… whose shoppers have downgraded to the dollar stores like Dollar General and Dollar Tree. 

And that’s the key behind Link Trades… pairing two stocks where one company is preparing to eat the other’s lunch. And that’s exactly what’s happening right now with Target and Dollar Tree.

Keep in mind, Monday is Juneteenth, now an official federal holiday, so the market is closed!

Are there any topics you’d like to see me cover or questions you’d like answered? Send me an email at jeff@joyofthetrade.com! And be sure to stay ahead of the markets by subscribing to our YouTube channel and our Instagram page for all of the latest!

P.S. Did Wall Street’s Screw up Just Create a Brand-New Strategy? 

Senior Strategist Roger Scott stumbled across a brand-new way to trade stocks… 

I’m talking about a strategy that doesn’t require any sort of technical indicators or fundamental analysis… 

And recently, he uncovered proof that what’s being taught on Wall Street about these little-known patterns is completely false!

So let him show you how crooked and rigged the game is against us as stock traders, even when fear levels in the market are at all-time highs.

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WRITTEN BY<br>Jeff Zananiri

WRITTEN BY
Jeff Zananiri

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