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Posts Tagged ‘DG’

Dollar General (DG) Stands to Benefit from Post Lockdown Sales Boost

Monday, June 29th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Check out the following two articles which have positive things to say about Dollar General – Top Consumer Staples Stocks for July 2020 and  Record Retail Sales Lead Post-Lockdown Recovery: 5 Winners. The first article highlights DG as one of the fastest growing consumer staples stocks based on its earnings per share ratio. The second article discusses why DG is one of five stocks that stands to gain because of lockdown easing measures.

Technicals

There are a number of things that signal strength in DG. The stock was quick to recover from the Coronavirus inspired push lower in March, and it didn’t take long for it to break to a fresh record high. Compare this to the S&P 500 which has yet to fully recover its losses from March. Further, DG has been able to continue the upward momentum since breaking to a record high in April, and dips have been shallow since. There is an upward trend channel that has encompassed price action for nearly three months now and it points to strong support at $186.

DG Chart June 2020 top 5 covid sales

DG Chart June 2020

If you agree there’s further upside ahead for DG, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open DG 31JUL20 182.5 Puts (DG200731P182.5)
Sell To Open DG 31JUL20 187.5 Puts (DG200731P187.5) for a credit of $1.78 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when DG was trading near $189.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $176.70 and your broker would charge a $500 maintenance fee, making your investment $323.30 ($500 – $176.70).  If DG closes at any price above $187.5 on July 31, both options would expire worthless, and your return on the spread would be 55% (627% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates June 27, 2020

IBD Underlying Updates June 27, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Will Dollar General Power to Record Highs?

Monday, October 22nd, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Will Dollar General Power to Record Highs?

DG is one of the few stocks on the IBD Top 50 list that is on the verge of breaking to record highs.  These two articles may help to explain what the driving force behind the momentum is Can Continued Growth Fuel Dollar General Corporation To Reach New Levels? and Sturdy Comps, Better Pricing to Propel Dollar General’s Sales

Technical strength in DG is seen best via correlation when looking at growth stocks and US equity indices.  As well, the stock appears to have recently broken above a bullish flag pattern, climbing above the 50-day moving average in the process.  DG ended the past week holding support near 109 and shows further support from a strong confluence found just above 107.

DG Chart October 2018

DG Chart October 2018

*source Tradingview.com

If you agree there’s further upside ahead for DG, consider this trade which is a bet that the stock will continue to advance over the next five weeks, at least a little bit.

Buy To Open DG 23NOV18 105 Puts (DG181123P105)
Sell To Open DG 23NOV18 110 Puts (DG181123P110) for a credit of $1.75 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when DG was trading near $110.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $172.50 and your broker would charge a $500 maintenance fee, making your investment $327.50 ($500 – $172.50).  If DG closes at any price above $110 on November 23, both options would expire worthless, and your return on the spread would be 53% (605% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates October 18, 2018

IBD Underlying Updates October 18, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

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Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins