Big-box retailer Target Corporation (TGT) reports earnings before the opening bell on Wednesday. The stock has been a laggard year to date and is in bear market territory versus its post-election high. The general merchandise retail giant needs to show a plan that combines an online sales strategy with in-store holiday spirit to offset recent performance disappointments.
Analysts expect Target to post earnings per share of between 85 cents and 90 cents on revenues of $16.48 billion. Earnings per share are expected to show a worrisome year-over-year decline, while revenues should be slightly higher. A key will be growth in Target's digital channel sales and its relationship with Google Express. (See also: Google, Target Team Up to Take on Amazon.)
Target just saw a "golden cross" on Oct. 19, when the stock closed at $60.43. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. Given this formation, a key level to hold on earnings weakness is the 200-day simple moving average at $56.91.
It has been an uphill battle for Target stock, which closed Monday at $60.40, down 16.4% year to date and in bear market territory at 23.9% below its post-election high of $79.33 set on Nov. 25, 2016. On the positive side of the ledger, the stock is in bull market territory at 24.4% above its 2017 low of $48.56 set on June 16.
The weekly chart for Target
The weekly chart for Target is neutral, with the stock above its five-week modified moving average of $59.76 but below its 200-week simple moving average, also known as the "reversion to the mean," now at $68.18. This key average was last tested at $70.25 during the week of Jan. 20. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 71.99 this week, down from 74.70 on Nov. 11.
Given this chart and analysis, my trading strategy is to buy weakness to my monthly and quarterly value levels of $53.85 and $52.70, respectively, and to reduce holdings on strength to my semiannual and annual risky levels of $71.15 and $93.28, respectively. (For more, see: Here's What Target Has Planned for Black Friday.)