NEW YORK (TheStreet) -- As the holiday spending rush approaches, big-box retailer Target (TGT) faces a higher hurdle when it reports its quarterly earnings on Wednesday, after the stock popped last week on an upgrade from Stifel Nicolaus.
The firm upgraded Target to buy from hold and raised its price target to $76. The shares traded at $66.66, down 47 cents, on Tuesday morning.
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Target became a momentum stock in mid-October as the shares rose 16% from $58.72 on Oct. 16 to as high as $68.28 on Friday. Analysts expect the company to report earnings of 47 cents per share before the opening bell on Wednesday.
The Stifel Nicolaus price target is above Target's all-time intraday high set at $73.50 on July 24, 2013. The stock was already in a downtrend well before the company revealed a data breach about a year ago. Shares broke below their 200-day simple moving average at $66.51 on August 21, 2013, and the decline cascaded to 26% from the July 2013 high to a 2014 low at $54.66 on Feb. 5.
Target became a momentum stock on Nov. 7 when its weekly chart became positive with the close above its key weekly moving average at $61.87 with rising weekly technical momentum. Given this technical profile, investors should trade the stock with an exit strategy.
Buying Target at Monday's close at $67.13 assumes that you expect the stock to rally by at least 7.5%, which results in a price target at $72.15. Enter a "good 'til canceled" limit order to sell strength to $72.15. Enter a sell-stop below a key technical level at $63.15.
If you like Target longer term and want to wait for share price weakness, enter a "good 'til canceled" limit order to buy weakness to a key technical level at $53.25.
Here's the daily chart for Target.
Courtesy of MetaStock Xenith
The daily chart for Target ($67.13) shows the 26% decline from the all-time intraday high at $73.50 set on July 24, 2013 and the break below the 200-day simple moving average (green line) at $66.51 on August 21, 2013. The downside accelerated about a year ago after the retailer reported the data breach, trading as low as $54.66 into Feb. 5.
After Target reported better-than-expected quarterly earnings on Feb. 26, the stock traded as high as $62.88 on Feb. 28, up 15%.
After the company reported on May 21 quarterly earnings that matched estimates, the stock declined to a secondary low at $55.25 on May 28. That proved to be the base from which the stock rallied 24% back above its 200-day SMA, now at $59.99, to the 52-week high at $68.28 set on Nov. 14.
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Here's the weekly chart for Target.
Courtesy of MetaStock Xenith
The weekly chart for Target shows that the 200-week SMA (green line) has been the staging area from which to buy the stock since March 2010 when the average was $50.67.
Target had been trading around the 200-week SMA between Jan.24 and Oct. 17 with the average now at $59.20.
The weekly chart is positive with its key weekly moving average at $63.92. The momentum reading shown in red at the bottom of the graph has a reading on the rise at $76.43, up from $68.10 a week ago.
At the time of publication, the author held no positions in the stock mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.