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TSCO Puts

10/11/2017

Weekly Chart

Tractor Supply Company (TSCO) which trades on the NASDAQ with a market cap of about $7.7B has been on a strong uptrend since 01/2010 when it was $13 rising it’s peak in 04/2016 at $97. Since then, it has been forming lower lows and lower highs and created a bearish head and shoulders formation starting with the left shoulder in 2013. In the past couple of weeks TSCO has been re-testing the neckline of the H&S and could be headed lower if it gets rejected.

The weekly 50 EMA (red line) has acted as support levels since 2011. This moving average was fully breached in 09/2016 with a 20% drop in a single day due to the company trimming guidance on 2016 revenue, causing analysts to cut their ratings. More recently, the weekly 20 EMA has been a level to watch for resistance levels. The 20 EMA has breached to the upside at the end of August only to be rejected by the neckline pivot before even testing the 50 EMA. The 20 EMA is a level to watch for now but the long-term trend is currently down. Levels in blue indicate possible targets for the downside (low 50’s is the first target).

TSCO-W

Daily Chart

On the daily chart, TSCO has seen the start of a build of higher highs with the formation and completion of an inverse head and shoulders pattern with the dotted-green neckline indicating that the intermediate-trend is bullish. As shown, this bullish move was rejected by the weekly head and shoulders neckline (dotted-red line) which coincided with the 200 SMA. A double top has formed at this resistance level. Should TSCO find support it will be at the inverse head and shoulders neckline which coincides with the daily 50 SMA. Otherwise it will retest the low 50’s experienced in July. If it does get to these levels, the low 50’s will act as some strong support due to the gap support (red box) from a gap-up from 01/2013. I’ve entered LEAPS Put options at the neckline resistance and will hold through for now. The next ER on October 25, 2017 should catalyze the price movement.

TSCO-D

 

UPDATE 10/31/2017

Closed Out of All Positions

A little late on the update. TSCO has been on quite the ride after the ER on October 25th which dropped the stock to as low as $54.80 on the open of the 26th. This 5% gap down was met quickly with some intraday volatility. If the gap were to stay open, I would have held my positions but decided to close them as the gap clearly filled and confirmed early on October 30th as it passed the $58.00 mark. I would have liked to see some more momentum to the bears, but we got lucky with the massive price drop after ER especially on such a bullish report. Happy to take profits and eye for another setup.
2017-10-31_18-21-54

 

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