Panic buying, panic selling

A few weeks back, I told you that you should like this COST, the stock for Costco. At that time, Costco was distributing its special dividend,  $7 per share, a great bonus for long-term shareholders. As I warned you though, the stock price would adjust down for the dividend but “good stocks like COST will likely come back to overcome this artificial decline”. This is exactly what has happened. COST indeed dropped quite a lot from high $170s to briefly below $170. While I did expect it to come back soon, I didn’t expect it to recover so fast. In just about a month time, COST has already surpassed its pre-dividend level and was over $180 before today. Then a bombshell was dropped today that Amazon (AMZN) will buy Whole Foods (WFM) for $42 per share. All the  stocks involving grocery including Costco, Walmart  (WMT) and Target (TGT) got smashed hard! Poor Costco crashed by 7% today and is trading below $170. There is panic buying for Amazon/WFM and panic selling for COST/WMT/TGT today!


Purely by luck, I happened to go long for Amazon and also WFM for a few days when both of them were sold hard in the past week or so. My long term COST shares obviously tanked today but I'm having covered calls with a strike of $168. Now with such kind of panic buying and selling, I'm busy today to go against the herd. I think AMZN is too expensive with a quite bearish technical pattern at the moment. So I took profits from the long positions and am shorting AMZN now. On the contrary, today's drastic selloff has created a great opportunity for these quality grocery stocks. I bought more COST and TGT, taking advantage of the "gift" from the herd.