(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Consumers stocks McDonald's Corp. (MCD), Home Depot Inc. (HD), Target Corp. (TGT) and Costco Wholesale Corp. (COST), could all be poised to fall to their 2018 lows in the coming weeks, based on technical analysis. All four stocks are already down sharply from their highs in 2018, with Home Depot down 16.5%, Target down 12%, McDonald's down 11%, and Costco down nearly 9%.
Target may be facing loses of nearly 9% from its current price around $69.65. This could result in shares falling almost 20% from its intraday high of approximately $78.70 in mid-January to nearly $63.25. (For related reading, see also: Amazon Will Buy Target in 2018.)
Home Depot shares peaked in late January and have fallen below a technical support level at $177. This could send shares to $159, a decline of nearly 8% from its current price around $173. More problematically, that support level has now become technical resistance, and the stock has been unable to rise back above $177 after multiple attempts. Additionally, the relative strength index (RSI) is only in the 40s and has failed to reach oversold conditions at below 30. It suggests the recent declines are not finished.
Costco shares continue to trade within a multi-year trading channel, and that has been a long-term positive. But shares of Costco are trading slightly below technical support, and have been trending lower since the start of 2018 when shares peaked intraday shy of $200. The RSI has also been trending lower, currently at 45, meaning the stock hasn't reached oversold conditions. The next level of support for Costco comes at $169, nearly 8% lower than its current price around $182.60, and almost 20% lower than its 2018 high. (For more, see also: Costco's Future Is Abroad.)
McDonald's shares reached a 2018 low around $147 around the beginning of March, and the stock looks like it could be heading back to those lows. After peaking intraday at nearly $179 in early January, shares have fallen roughly 10.5%. Now the stock is trying to rise above resistance at $160 and has already had one failed breakout attempt. The second attempt to this point has been unsuccessful. It means shares should be heading lower back to $147.
For now, the four stocks are at critical points technically, and should those support levels hold for each, then a rebound could be in the works. But with the current negative sentiment in the stock market, these four stocks are fighting an uphill battle.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.