Short on Victoria's Secret

30 janv. 2023

To begin, I am not a Seasoned Trader; I use this blog for:

1. Record keeping; &
2. Formalizing my thoughts
a. If I can't explain simply here, I shldn't engage

To begin, my Rules of Engagement ( RoE ) to identify an upside of +3 to 1 Risk to Reward ( “R/R” ).

• Asset | VSCO ( Victoria Secret )
• Type | Equity
• Position | Short
• Entry | $ 39.52
• Stop Loss ( SL ) | $ 41.11
• Target | $ 30.32
• Exp. Time Horizon | ~1 – 2 Wk’s
• Allocation | 2.5%
• R/R | 3.60 – 5.06

To begin, I will highlight the reasons why I am apprehensive about the trade ( the Con’s ) & finish up with the reasons why I’m interested in the position ( the Pro’s ). The issues / thoughts that make me uneasy ( the Con’s ) are:

• Irregular nature of the current market
o We are in a “Bear Market Rally”. Although, they always come to an end & will proceed lower, picking when is almost impossible.

• Sentiment
o Although the UofM sentiment is low, it is rising.

• FedWatch Tool
o The FedWatch tool only prices a 25 bp rate increase; that would be their first 25 bp increase in many reiterations but that’s what the market is saying.

• Share Repurchase Program
o They authorized the repurchase of up to $250 million of the Company’s common stock will be made in the open market, subject to market conditions and other factors; this year ( 2023 ).
o They could buy me out.

• PMI’s
o ISM New Orders #’s for Apparel are 0 ( i.e. not really falling “just yet” )
o These #’s will be updated the day before the Fed Meeting this Wednesday.

Now, the reasons I am interested in this position ( the Pro’s ):

• Sentiment ( cont. )
o As mentioned above, UofM Sentiment is rising albeit

• PMI’s
o ISM #’s for Apparel are within the middle of the range of “below 50”.

• Retail Sales
o I don’t see much correlation with these against VSCO; something to mention.

• Employment
o The Employment Situation in the US is favorable for employee’s. I could go through ALL of the employment metrics albeit I will say Initial Jobless Claims is the most volatile & while it “was” rising, it re-started it’s decline.
o Why do I care about this? Because this trade has more to do with the Federal Reserve decision & while Inflation is falling, Oil is rising ( albeit should not be with the recent Inventory #’s coming in ) meaning the Fed’s Inflation concern is still worse than it’s employment one; this means, a 50 bp rise is “likely”

To summarize, this Trade has A LOT to do with the Fed meeting this Wednesday. I believe they will raise interest rates by 50 bp’s but the FedWatch tool has it at 25 bp’s.

Financial Disclaimer | To reiterate, I’m not a Financial Advisor. If you engage based on the contents herein, you will lose money. If you interpret that mean by doing the opposite you will make money, that’s incorrect; you will also lose money.

Thanks for your time; I hope you have a lovely day.