The retail sector has had a tough year with the SPDR S&P Retail ETF (XRT) falling nearly 6% since the beginning of the year.
Target Corporation (TGT) has experienced a particularly difficult start to the year after reporting an abysmal fourth quarter. Revenue fell 4.3% year over year to $20.69 billion, but a 100 basis point reduction in gross margins and a 30 basis point reduction in EBITDA margins were the market's biggest concerns. Analysts see the stock as caught between Walmart Stores Inc. (WMT) and Amazon.com Inc. (AMZN) in terms of its strategy.
On a technical level, Target shares remain near their 52-week lows after making an attempt to breakout higher earlier this month. Relative strength index readings suggest the stock is oversold at 35.63 while moving average convergence-divergence readings showed a modest bullish uptrend. Traders should watch for a breakout from these levels toward R1 resistance and the 50-day moving average at $59.16 if the stock can rebound from its lows.
Bed Bath & Beyond (BBBY) may have only fallen about 4% so far this year, but the stock also trades near its 52-week low of $37.28. Unlike Target, the company topped fourth quarter estimates with a 0.4% increase in comparable sales, although it expects EPS to fall at a low single-digit pace this year. The company was also boosted by a $1.7 billion share repurchase plan, of which, $171 million was spent during the fourth quarter.
On a technical level, the stock remains near its 52-week lows and has experienced troubles breaking out from its 50-day moving average at $39.73. Traders should watch for a breakout from these levels with strong downside protection at prior lows and S1 support at $37.82. A breakout could send shares to R2 resistance and 200-day moving average levels at $42.38. Both RSI and MACD readings remain more neutral than Target, however.
With retail stocks having moved significantly lower, traders may want to watch for oversold conditions and opportunities to buy into a rebound.
Stock charts courtesy of StockCharts.com. Author may hold positions in stocks mentioned via ETFs and mutual funds.