How to Trade Target at Its 2015 Low -- Technical Charts

Target has been following other retailers lower as earnings for consumer-related stocks have been disappointing. But can its earnings be on target?
By Richard Suttmeier ,

Target (TGT) - Get Report recently announced store closures as this big-box retailer prepares to report earnings for the quarter ended in October. Target has had a string of four consecutive quarters of beating analysts' estimates. The stock set an all-time high on June 23, and it had a positive reaction to earnings reported on Aug. 19. Even so, the stock set its 2015 low on Monday

Target stock was hurt by a technical "death cross," confirmed on Sept. 28, when 50-day simple moving average fell below the 200-day simple moving average when the stock closed at $77.67. A "death cross" indicates that lower prices lie ahead. The stock traded as low as $70.80 on Monday.

Analysts expect Target to earn 86 cents a share. TheStreet's portfolio analyst Scott Berman indicated that the retailer has been beating estimates since its new CEO came on board. Star Wars merchandise sales and back-to-school spending could give Target an edge, despite weaker-than-expected retail sales.

Target is a component of the Consumer Discretionary Select Sector SPDR Fund (XLY) - Get Report , which has been downgraded to neutral from overweight by Fundstrat. The technicals favored an underweight rating on Nov. 5.

Here's the daily chart for Target.


Courtesy of MetaStock Xenith

The daily chart shows that Target had a close of $72.31 on Monday, down 8.1% so far in the fourth quarter and down 4.7% year to date, and in correction territory -- 15.7% below the all-time high of $85.81, set on June 23.

The stock began 2015 above a "golden cross" on Sept. 11, 2014, when the stock closed at $62.59. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. This signal was still in effect at the June 23 high of $85.81.

The stock set a secondary high of $84.62 on Aug. 19 on a positive reaction to earnings, released before the opening bell that day. The stock plunged to a flash crash low of $71.91 on Aug. 24. This crash also put the stock below its 200-day simple moving average. Strength following Aug. 24 tested the 200-day on several days between Aug. 28 and Oct. 14.

This sideways price action resulted in a "death cross," confirmed on Sept. 28, when the 50-day simple moving average fell below the 200-day simple moving average with a close that day of $77.67. A "death cross" indicates that lower prices lie ahead and the stock set its 2015 low of $70.80 on Nov. 16.

Here's the weekly chart for Target.


Courtesy of MetaStock Xenith

The weekly chart for Target is negative, with the stock below its key weekly moving average of $75.31. It is above its 200-week simple moving average of $66.33.

The weekly momentum reading is projected to decline to 28.23 this week, down from 32.01 on Nov. 13. Momentum scales from 00.00 to 100.00 with a reading below 20.00 oversold and a reading above 80.00 overbought. A rising reading above 20.0 is positive, while a declining reading below 80.00 is negative. This study is shown in red along the bottom of the chart.

The horizontal lines are the Fibonacci Retracements of the rally from the March 2009 low of $25.00 to the all-time high. Recent weakness held the 23.6% retracement of $71.45.

Investors looking to buy Target should place a good till canceled limit order to buy the stock if its drops to $58.17, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holdings should place a good till canceled limit order to sell the stock if it rises to $75.30, which is a key level on technical charts until the end of this week. A higher key level is $78.54 is in play in play until the end of.2015.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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