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John Mylant
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Residing in Colorado Springs, Colorado. Has been trading and coaching using a self-developed option trading system for 10 years. Philosophically conservative, accurately trades weekly options with a strong risk management approach. Well sought after by investors around the world, he teaches a... More
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  • Safeway is Gaining Bullish Sentiment 0 comments
    Jul 17, 2010 10:25 AM | about stocks: SWY
    Safeway Inc (NYSE:SWY) Bullish Sentiment is Building!

    Grocer Safeway has had a nasty reversal of fortunes, at least as reflected in the performance of its share price having marched to above $27 in mid-April. Since then, however, its share price has slumped to 
    A
    $19.47 at the beginning of this month.

    During the last several days put open interest appears to be on the rise specifically at the $20 strike expiring next month.

    If today's put-selling is anything to go by it seems that some investors are calling for an end to the slide. A couple of notable chunks of puts were traded inspired by sellers today.

    The news is all positive for Safeway's future. Jay Palmer, a write for Barron's writes: "Safeway appears to be approaching a critical turning point. Its main market, recession-battered California, is starting to show signs of improvement. An ambitious store-remodeling program promises to lure greater numbers of upscale shoppers. And the company is steadily strengthening its balance sheet—good protection in a hyper-competitive industry."

    With that news in mind, we can see nice technical signs of a turn around coming also. The RSI ans Stochastic Indicators are already showing Positive Divergences as the stock may have reached bottom.

    The key to the "about face" for Safeway will be the economy of California. It appears to be slowly moving forward, even if at a snails pace. They are doing well in their actions! Debt is quickly being paid off. A debt equity ratio has dropped from 85% in 2006 and is projected to be 29% by 2011. They are winning more business in both the high and low end shoppers. As the California market recovers we could see Safeway stock improve substantially.

    We are looking to invest here! But we are waiting until next week because we beleive the markets are going to take another hit. Selling the naked Puts for August seem to be a really good play.



    Disclosure: Buy
    Stocks: SWY
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