Big box retailer Target Corporation (TGT) reports earnings before the opening bell on Tuesday, March 6, with the stock above a "golden cross" since Oct. 19, when it closed at $60.43. Shares of Target are trading between my semiannual pivot of $72.94 and my monthly risky level for March of $76.70. The stock closed Friday, March 2, at $75.15, up 15.2% year to date and down 4.5% from its Jan. 23 high of $78.70. Target traded as low as $68.39 at its Feb. 6 correction low.
Analysts expect Target to report earnings per share of $1.39 to $1.40 before the opening bell on Tuesday. The stock had a negative reaction to its previous earnings report on Nov. 15, but this low of $54.04 proved to be a buying opportunity. One metric to focus on is growth in online sales versus sales in stores, which was just 4.3% in the pre-holiday quarter. For comparison, Walmart Inc. (WMT) reported earnings on Feb. 20 and suffered a price gap lower. After the company missed earnings per share estimates, Walmart stock fell 17%, testing its 200-day simple moving average of $87.21 on March 2. (See also: Home Decor Wars: Walmart Takes on Target.)
The daily chart for Target
Target has been above a "golden cross" since 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. The stock subsequently traded on weakness around its 200-day simple moving average between Nov. 15 and Nov. 28 as investors became more bullish on Target's potential holiday sales. Investors could have purchased shares of Target then at $56.84. The stock is now between horizontal lines that mark my semiannual pivot of $72.94 and this month's risky level of $76.70. (For more, see: Target Eyes Boost From Tax Cut, Delivery Service.)
The weekly chart for Target
The weekly chart for Target is positive but overbought, with the stock above its five-week modified moving average of $73.08. The stock is also above its 200-week simple moving average of $68.93, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading ended last week at 83.29, slipping from 83.37 on Feb. 23, with both readings above the overbought threshold of 80.00. The horizontal lines are the Fibonacci retracement levels of the decline from the June 2015 high of $85.81 to the June 2017 low of $48.56. The stock has been above its 61.8% retracement of $71.58.
Given these charts and analysis, investors should buy Target shares on weakness to my semiannual value level of $72.94 and reduce holdings on strength to my monthly risky level of $76.70. My quarterly value level lags at $58.50, and my annual risky level is $81.64. (For additional reading, check out: Target: Can Same-Day Delivery Compete With Amazon?)