Target (TGT) has been among a cohort of retailers that has done quite well despite the pandemic.
Deemed essential, the company's stores remained open when many retailers were forced to close. Would it have really mattered that much though?
Target’s omni-channel operations have helped drive solid growth as e-commerce momentum remains strong. That’s true for Target, but it’s also true for Costco (COST) , Walmart (WMT) and other retailers doing well.
While Target stock has been a big winner from the 2020 lows, there’s some hesitation among investors to bid it higher into earnings. Those results are scheduled for before the open of trading Tuesday.
With such a large rally already in the books, that makes sense.
However, it also makes sense after seeing the recent skid in Costco and the post-earnings dip in Walmart - with the latter falling in six of the seven sessions following its quarterly report.
Let’s look at the charts.
Target stock has had a great pattern for bulls. The stock runs to new highs, pulls back where the dip is bought and then rallies to new highs.
Interestingly though, the stock didn’t make a new high after the most recent pullback. In fact, it made a lower high.
That’s not a nail in the coffin necessarily, but it could be a canary in the coal mine for buyer exhaustion.
Earnings should be strong from Target, but will the report be strong enough and will management be upbeat enough about the future to justify new highs?
Target stock has been fairly responsive with its various Fibonacci extensions. Over the last few months, it’s also been quite responsive to its 50-day moving average. Stalling on that measure now though and earnings will be a key driver for whether it remains support or fails.
If the reaction is lower, let’s see if Target stock tests down into the $175 to $177 area. That will generate a test of the January low and the 100-day moving average, where bulls may get a buy-the-dip opportunity.
Below that and the two-times range extension is in play near $170.
At a minimum, bulls want to see an upside move that puts Target above the 10-day and 21-day moving averages. However, a move north of $194.50 would be ideal.
That would put it above downtrend resistance, the recent lower high and the 261.8% extension, which has been quite responsive in 2021. Above $200 and Target could make its way to the three-times range extension.