The sell off began in premarket trading after the company reported earnings.
Target beat analysts’ top- and bottom-line expectations and even raised its full-year outlook for same-store sales.
Despite that, gross margins were pressured in the quarter and that could continue going forward, as management “noted margin pressures linked to supply chain disruptions and labor costs.”
It’s been a mixed reaction in retail earnings so far.
For Target, support is coming into play where it’s needed. Let’s look at the charts.
Trading Target Stock
Ahead of earnings, Target stock rallied to new all-time highs on Monday and gave investors an inside day on Tuesday.
That would typically set up the stock for an inside-day rotation, but because earnings were in play, it nixed the setup — and that’s just fine.
There are multiple areas that are jumping out to me right now. When the stock began to erode in premarket trading, it was clear the stock was likely to test into the low-$250s.
In this area, there is a bevy of support.
Specifically, there is support in the $251 to $252 area (purple box), which buoyed the stock as it consolidated from Target’s big rally in October.
Additionally, there’s the 10-week and 21-week moving averages in play, as well as the 61.8% retracement of the current range.
You can exclude the retracement if you’d like, but Target’s chart makes it clear traders should be looking at assets over multiple time frames.
In any regard, we’re getting a doji candle developing with today’s action as support in the low-$250s continues to hold.
This is a good look for bulls.
On the upside, bulls want to see if Target can reclaim the 10-day moving average. If it can, $260-plus is in play, followed by the gap-fill near $262.75. Above that puts a retest of the prior all-time high in play near $267.
Conversely, a move below $250 could put the 50-day moving average in play. Below that and we could see a larger drift to the downside.