Macy's (M) - Get Macy's, Inc. Report is down about 11%, while Home Depot (HD) - Get Home Depot Inc. (The) Report is off 5% after disappointing investors, too, as shares near critical support. Others are doing better -- TJX (TJX) - Get TJX Companies Inc. (The) Report is up 2%.
For Kohl's, the disappointment was broad. The Menomenee Falls, Wis., company missed on earnings expectations and slashed its full-year profit outlook. Despite a low valuation and big dividend yield, investors are dumping this one hand over fist.
To little surprise, the haircut is dealing a notable blow to the technicals. Perhaps to some surprise, the stock is not making 52-week lows on the move.
Let's look at the short-term and long-term charts.
Trading Kohl's Stock
Above is a daily chart of Kohl's stock. As you can see, the shares gapped below the 50-day, 100-day and 200-day moving averages on Tuesday and continue to sell lower.
Maybe buyers step in near $46, where Kohl's stock has short-term up-trend support (blue line), though it's hard to bank on that with a high degree of confidence. But when that's considered alongside the clear support sitting between $44 and $46, bulls may consider this area a solid risk/reward for buying the dip.
Ideally, traders can give the stock a few days to exhaust itself on the downside, where they'll then be able to gobble up shares closer to support. If support gives way -- a close below $44 -- then traders can cut their minimal losses and move on.
On a bounce, let's see whether KSS can get back to $50, which is roughly the post-earnings high from Tuesday, as well as the 100-day moving average. A rebound back to $50 would also send Kohl's back toward its 200-week moving average, which can be seen below.
It's a crude outline on the weekly chart above, but the $43-to-$45 area has proved significant over the past five years, both as support and resistance. Further, dating to 2016, Kohl's stock has an up-trend support level (black line) in play around $44.
Do these two charts guarantee that support will come into play for KSS on a further decline? No. But it improves the risk/reward of entering in this area vs. entering up at $48, while also improving our odds for success. In trading, that's all we can ask for.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.