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Kohl’s Reports Tuesday - Here's What the Charts Say

Retailer Kohl's reports on Tuesday. Buy Kohl’s on weakness to its weekly pivot at $18.41 and its 50-day simple moving average at $18.04.

Department store chain Kohl’s  (KSS) reports quarterly earnings before the open on Tuesday. And a positive reaction to the earnings will have the stock poised for a positive weekly chart at the end of this week.

The retailer of apparel, shoes, accessories, and home and beauty products at discounted prices in early May has been reopening stores. The stores had been closed due to covid-19.

Because of these closures, Kohl’s is expected to report a loss of $1.81 a share on $2.62 billion in revenue. Here’s a link to a news release dated May 7 that describes the reopening plans in more details.

The stock is trading above its 50-day simple moving average at $18.04, which lines up with its weekly pivot at $18.41. 

The shares bottomed at $10.89 on April 3 and have moved sideways to up since then. 

The stock has a p/e multiple of 3.6 with a dividend yield of 16.05%, according to Macrotrends. I doubt that this dividend can be sustained.

The stock opened Monday at $18.54, down 64% year to date and deep into bear-market territory 69% below its Nov. 15 high of $59.28. 

The stock is also in bull-market territory 70% above its April 3 low of $10.89.

Volatility provides trading opportunities if you learn how to read the charts.

You should also use value levels at which to buy and weakness and risky levels at which to book profits on strength.

The Daily Chart for Kohl’s

The Daily Chart for Kohl's

The Daily Chart for Kohl's

Courtesy of Refinitiv XENITH

Shares of Kohl’s have been below a death cross since Dec. 24, 2018, when the 50-day simple moving average fell below the 200-day simple moving average. A move like this indicates that lower prices will follow.

When a stock is below a death cross, the strategy is to sell strength to the 200-day SMA. This opportunity occurred on Nov. 14 when the average was $56.82.

The stock gapped lower on Nov. 19 on a negative reaction to quarterly earnings. 

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 The stock stayed below its 50-day SMA until today with the average at $18.04.

The stock is also holding its weekly value level at $18.41. Holding these key levels targets its monthly and quarterly risky levels at $26.58 and $36.69, respectively.

The Weekly Chart for Kohl’s

The Weekly Chart for Kohl's

The Weekly Chart for Kohl's

Courtesy of Refinitiv XENITH

The weekly chart for Kohl’s is negative but oversold, with the stock below its five-week modified moving average at $19.88. 

The stock is well below its 200-week simple moving average, or reversion to the mean, at $52.05.

The 12x3x3 weekly slow stochastic reading is projected to rise to 19.46 this week from 16.72 on May 8.

At its April 3 low this reading was below 10, making the stock technically too cheap to ignore.

Trading Strategy: Buy Kohl’s on weakness to its weekly pivot at $18.41 and its 50-day simple moving average at $18.04. Reduce holdings on strength to the monthly and quarterly risky levels at $26.58 and $36.69, respectively.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.

The second quarter 2020 level was established based upon the March 31 close.

The monthly level for May was established based upon the April 30 close.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.