The Big 3: WMT, BABA, C
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Don Kaufman, co-founder of TheoTrade, flips the script on market narratives by spotlighting three high-conviction trades in the 'Big 3' segment of Schwab Network’s show. While most investors chase AI-driven momentum, Kaufman identifies Walmart (WMT) as a surprising outperformer—up 15% YTD—despite being a consumer staple, and calls for a bullish call spread targeting all-time highs. He then takes a contrarian bearish stance on Alibaba (BABA), betting on a short-term fade after a sharp rally, using a narrow put spread to profit from a pullback to the 120 level. Most provocatively, he declares Citigroup (C) 'wildly overbought'—not just technically, but via option market behavior—and swings for the fences with a wide $10 put spread, targeting a drop below $115 by June. The episode reframes 'safe' stocks as momentum engines and 'hot' stocks as overextended traps, challenging conventional sector rotation logic. Kaufman’s strategy hinges on quantifying market overextension through options data and technical divergence, not just price charts. His Walmart trade capitalizes on momentum and breakout potential, while his BABA and C trades exploit short-term reversals in overbought conditions. Rick Ducat’s technical analysis validates these setups with volume profiles, moving average divergence, and key support/resistance levels.
Walmart (WMT) is up 15% YTD, outperforming most large-cap tech stocks and poised for a breakout to all-time highs near $135.
Don Kaufman uses a $5-wide call spread on WMT with a $1.50 debit, targeting a breakout above $135 by May 15.
Alibaba (BABA) is being faded after a 30% rally from 120 to 140, with a $2-wide put spread betting on a pullback to 120 by May 8.
Citigroup (C) is declared 'wildly overbought' by option market behavior, with three consecutive weeks exceeding expected moves—setting up a high-risk, high-reward $10-wide put spread to June 18.
The trade on C targets a drop below $115, with a break below $123 and the 21-day EMA as key technical triggers.
…and 3 more takeaways available in PodZeus
The Big 3: Market Context and Risk-on/Risk-off Dynamics
Host Marley opens the segment with a discussion on the market’s persistent risk-on/risk-off behavior, noting the S&P is up only 4% YTD despite recent rallies. Don Kaufman confirms the market is still in a state of uncertainty, driven by AI momentum but lacking resolution on geopolitical and macroeconomic fronts.
Walmart (WMT): The Consumer Staple Outperforming Tech
“Walmart is up 15% on a year-to-date basis. Look around a little bit. I mean, yeah, there's a couple of tech stocks and big AI stocks that are outperforming, but they're few and far between.”
Alibaba (BABA): Fading the Rally After a 30% Surge
“I'm looking for this to kind of roll back over a move back all the way to like the 120 level. So it went from 180 to 120, rallied all the way back to 140. Now I'm looking for the fade back to 120.”
Citigroup (C): Swinging for the Fences on a Wildly Overbought Stock
“I'm actually going to swing for the fences on this one... I'm going to buy a full-blown $10 widespread... it's got to get all the way though under 115 by the June options expiration.”
Technical Validation and Closing Thoughts
Rick Ducat provides technical confirmation for all three trades, highlighting key support/resistance levels, volume profile nodes, and moving average divergence. He validates the breakout potential in WMT, the overbought condition in C, and the pullback target in BABA.
“up 15 on a year -to -date basis. look around a little bit. I mean, yeah, there's a couple of tech stocks and big AI stocks that are outperforming, but they're few and far between.”
“The stock is actually set up very nicely now to kind of squeeze into all time highs. And that's really what kind of breaks down.”
“I'm not looking for just a smaller pullback here. Here I'm actually going to be looking for a meaningful pullback.”
Host
Guest
Walmart
organization
Don Kaufman
person
Citigroup
organization
Alibaba
organization
Rick Ducat
person
TheoTrade
organization
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