The retail sector has been under pressure for the last year, but there are three stocks in the space that have successfully retested recent lows and held up well over the last several days of broader market weakness.
This positive price action is indicative of stocks that want to advance, and any respite from the Brexit related selling could see these names surge higher.
Let's take a closer look.
Target (TGT) - Get Report shares pulled back from their April highs to return to their earlier low this year, retesting that level in May and again this month, potentially forming a triple bottom on the daily chart. Shares have been moving in a horizontal channel with the triple-bottom low as support and the $70 area acting as resistance.
The relative strength index has moved out of an oversold condition and is nearing a center line crossover, and moving average convergence/divergence made a bullish crossover earlier in the month and is tracking higher. Chaikin money flow has been attempting to re-enter positive territory, and accumulation/distribution is moving above its 21-period signal average.
Target closed in upper candle range in Friday's session and formed a hammer bottom candle in Monday's session, in opposition to tough market conditions. An upper candle close above channel resistance is a long entry point, using a trailing percentage stop, with the top end of the gap as an initial price target.
Target's domestic focus and almost 3.5% dividend yield helped the stock outperform at the end of the week while the rest of the market fell victim to Brexit concerns. TGT shares should continue to benefit as long as the dollar remains strong, and this could last for some time until the implications of U.K.'s exit from the EU are better defined. That being said, we remain disappointed in TGT's latest quarter and need to see a turnaround in the business before we look to get back in.
The chart of Kohl's (KSS) - Get Report looks similar to the Target chart, with the stock trading in a channel but after having broken below the previous low of the year. Another strong-looking hammer candle formed today against the backdrop of a weak overall market, and the stock looks like it wants to continue the run back up toward the channel high in the $38.50 area.
The relative strength index is trending above a rising 21-period average, and daily moving average convergence/divergence is tracking higher along with the overlaid weekly histogram of the oscillator. Chaikin money flow has been in positive territory for the last two weeks, reflecting early buying interest in the stock at its current level. This is another long candidate after an upper candle close above channel resistance followed by a close trailing percentage stop.
The Gap (GPS) - Get Report chart has a gap that has just been filled and a second waiting to be filled in the $27 area. The stock has established a short-term uptrend line off its May and June lows and has risen to close the initial gap and retest its 50-day moving average.
The aroon indicator, which is designed to identify early shifts in trend, has made a bullish green-over-red crossover. Daily moving average convergence/divergence is crossing over its center line, and the weekly histogram is not far behind. Money flow is the most positive on this chart, with accumulation distribution crossing above its signal line and Chaikin money flow indicating that the stock is under accumulation.
Gap is a buy after an upper candle close above the $21 level, again utilizing a close trailing percentage stop.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.