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Kohl's Stock Sells Off After Report - Here's Key Support

Kohl's stock is selling off even after the retailer beat earnings and revenue estimates. Here's the must-hold support level for the stock.

It is not an easy day for Kohl’s  (KSS) - Get Kohl's Corporation (KSS) Report investors, with the retailer's shares at last check down 17% after it reported earnings.

In fact, it’s not an easy day for retail in general. Despite better-than-expected results, both Walmart  (WMT) - Get Walmart Inc. Report and Home Depot  (HD) - Get Home Depot, Inc. (HD) Report are lower on Tuesday as well.

In other words, the winners in retail aren’t really being rewarded and the losers are getting hammered.

For Kohl’s' part, the Menomonee, Falls, Wis., company actually beat on earnings and revenue expectations. But the results were not that inspiring, as the company posted a loss of 25 cents a share. Revenue of $3.4 billion was down more than 20% year-over-year.

The stock initially rallied on the news, which was reported before the market open. But management said the climbing case count for the coronavirus weighed on sales last month.

Now, it’s flirting with a loss of key support.

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Daily chart of Kohl's stock.

Daily chart of Kohl's stock.

In April, Kohl’s shares stabilized after a violent selloff in March. In June, the stock filled the last big gap it had from March. Since then it has struggled.

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In August, Kohl’s stock gave investors a solid pre-earnings rally and a nice consolidation ahead of the report. It looked ready to head higher on positive news and ahead of what many investors were likely hoping would be a strong back-to-school shopping season.

Instead, the stock ultimately put in a lower high (blue line) after the post-earnings reaction was lower.

Amid that pullback, shares of Kohl’s gapped below the 20-day and 50-day moving averages, as well as the 23.6% retracement.

Now, Kohl’s stock faces critical support, which comes into play near $18.50.

This mark was resistance in March and May and has been support since June. If this level is lost, more downside could ensue. 

For a sector that’s made up of the haves and the have-nots, investors do not want to get caught up in the latter.

A close below $18.50 could put the $15-to-$16 area in play. 

Below that and maybe we see a gap-fill toward $14.50 from April, a gap that was never quite filled as support near $15 continued to come into play on the dips.

In a nutshell, watch $18.50.