By definition, the stock continues to have momentum characteristics after setting an all-time intra-day high at $64.82 on Nov. 7. As a momentum stock, its weekly chart is positive but overbought with Friday's close above the key weekly moving average at $61.59 with overbought weekly momentum.
The parent of Home Goods, Marshalls and TJ Maxx reports third-quarter earnings before the opening bell on Tuesday. Analysts expect the company to report earnings of 85 cents a share.
Home Goods sells discounted products for every room, plus livable outdoor areas. TJ Maxx offers brand-name apparel, jewelry and accessories at discounted prices, while Marshalls expands the product line to discounted designer goods.
These product lines, at affordable prices, help wealthy consumers save a buck on quality items and allow consumers on a budget to find bargains. Discount retailers should be in the sweet spot during this year's holiday shopping season.
Meanwhile, investors should always have an exit strategy when investing and trading momentum stocks.
Have a price target and enter a "good 'til canceled" limit order to book profits on strength to that level.
Have an exit strategy following a rising key weekly moving average. As momentum continues and the stock moves higher, this moving average will rise each week. Enter a sell-stop to lock in gains if the stock falls below this average.
Here is how to trade TJX Companies.
TJX ($62.32): Enter a "good 'til canceled" limit order to sell strength to a key technical level at $66, 5.9% above $62.32, and enter a sell-stop below a key technical level at $60.65. This level will change at the end of the year.
Here is the daily chart for TJX:
Courtesy of MetaStock Xenith
The daily chart for TJX ($62.32) shows that the stock traded down 19% from its Jan. 13 intra-day high at $64.38 to its 2014 intra-day low of $51.91 set on July 18. The stock then surged 25% to an all-time intra-day high at $64.82 set on Nov. 7.
Weakness to the low was fueled by an earnings miss on May 20. The momentum to the all-time high was powered by an earnings beat reported on Aug. 19.
Here is the weekly chart for TJX:
Courtesy of MetaStock Xenith
The weekly chart for TJX momentum run-up for the stock began from the 200-week simple moving average (green line) in May 2009 when this average was $13.53. The weekly chart is positive but overbought with the key weekly moving average at $61.59.
The overbought momentum reading is shown at the bottom of the graph with a reading of 86.95, well above the 80 overbought threshold.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates TJX COMPANIES INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TJX COMPANIES INC (TJX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."
You can view the full analysis from the report here: TJX Ratings Report