• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Roll the Dice on Vipshop, or Play It Safe With Target

A look at 2 very different plays into earnings.
By TIMOTHY COLLINS
May 17, 2016 | 12:16 PM EDT
Stocks quotes in this article: TGT, VIPS, HD

Direction predictions for earnings are difficult, and often near impossible to repeat on a consistent basis. Trading stocks into earnings results in wide swings, big gains, big losses and lots of emotion.

Consistency and risk management are keys for surviving and prospering in this business, and earnings often offer very little in either category. I have moved away from heavy directional trading, although I will still make smaller directional trades when I feel the risk-reward warrants it. And technical analysis isn't as big a part of my earnings trading as it once was. I've found more use for TA in options pricing, statistics, regression analysis and past results.

Although I still consider current setups in the charts, I am looking more to sentiment, along with cohesion between support or resistance levels and the aforementioned factors. This often results in trades anticipating a certain size, rather than a specific direction. While the overall return in such trades are often low to moderate, success rates have been higher.

I see a lot of Home Depot (HD) in Target (TGT), right now, in terms of expectations. Over the past seven reports, we've only seen one exceed tonight's expectations of 4.5%. While the trend is flat, it is really showing little relationship, so rather than rely on statistics here, I am looking more at past results. Six of seven have been positive, and, as I mentioned, only one has exceeded 4.5% which makes it difficult to expect a large move. Furthermore, sentiment is extremely negative, yet TGT bulls have done a good job fending off big moves lower.

If I'm looking for a big move, Chinese retailer Vipshop (VIPS) is the name to look at, rather than TGT. The trend on VIPS is higher, in terms of expected move. Options are pricing a move around $1.50, or 12%, and I believe we're likely to see it.

There has been strong action on the call side of this stock, and given the huge beatdown it has suffered, I may consider joining that side of the fight. Four of the past five reports have seen double-digit moves, although two of those have been to the downside. So although recent history may be on the side of a big move, directional history is not. Still, there is enough action with the calls, here, that taking a small shot on the $12.50-14 weekly spread appears interesting for aggressive portfolios.

Overall, I'm looking for a smaller-than-expected move on Target, and feel the pessimism there may be overdone. History should cap any move lower, while pessimism will cap a large move higher.

On the flip side, VIPS looks like a casino waiting for someone to roll the dice. Expect action, excitement and lots of movement, here. Anything under 5% would be shocking to me.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins was long HD ratio put spreads, although positions may change at any time.

TAGS: Investing | Global Equity | Consumer Discretionary

More from Consumer Discretionary

Signet Jewelers May Retest the Breakout From Its Base Pattern

Bruce Kamich
Jan 15, 2021 8:09 AM EST

There is a risk of a pullback to the top of the base pattern or down to the $30 area.

Norwegian Cruise Lines Fights to Survive

Jonathan Heller
Jan 13, 2021 11:00 AM EST

The markets appear to be looking forward for the cruise industry.

Coca-Cola Could Turn Lower as the Bullish Fizz Is Escaping

Bruce Kamich
Jan 6, 2021 9:15 AM EST

Price momentum often weakens before a turn lower.

Planet Fitness Charts Suggest Its Shares Could Use Some Firming Up

Bruce Kamich
Jan 6, 2021 8:11 AM EST

The technical signals indicate that the stock of the fitness chain could head lower in the weeks ahead.

I Like Peloton to Keep Rolling in 2021, and Planet Fitness Might Be a Buy, Too

Ed Ponsi
Dec 24, 2020 8:30 AM EST

The former name is technically overbought but offers reasons to expect it to grow, while the latter should benefit from the Covid-19 vaccines.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    When it's time to sell, will you act or freeze?
  • 08:35 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 1/13/2021

    Lower highs... SPX (Long-Term View) The 1/8/2...
  • 08:07 AM EST GARY BERMAN

    Tuesday Morning Fibocall for 1/12/2021

    Watch if the recent trend of lower highs continues...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login