The TJX Companies, Inc. (TJX) is the parent of discount retailers TJ Maxx, Home Goods, and Marshalls. These retailers offer quality items at discount prices. The company reported earnings before the opening on Feb. 26 and beat on both earnings per share (EPS) and on revenue.

The stock set an all-time high of $64.95 on the news. This strength was shy of its annual and quarterly risky levels at $65.08 and $66.90, providing a warning. The stock then began to slump with the stock market. As March began, TJX shares failed at the monthly risky level at $63.51. On Friday, March 6, the stock tested its semiannual value level at $57.40 and its 200-day simple moving average (SMA) at $57.28.

The stock ended last week at $58.56, down 4.1% year to date and down 9.8% from its all-time intraday high of $64.95 set on Feb. 26. TJX stock is in bull market territory at 41.1% above its Dec. 24, 2018, low of $41.49. The stock is not cheap, as its P/E ratio is 22.43 with a dividend yield of just 1.45%, according to Macrotrends.

The daily chart for TJX Companies 

Daily chart showing the share price performance of The TJX Companies, Inc. (TJX)
Refinitiv XENITH 

The daily chart shows that TJX began 2019 with a false "death cross." Then a "golden cross" was confirmed on March 28, 2019, when the 50-day SMA rose above the 200-day SMA to signal that higher prices would follow. When a stock is above a "golden cross," the strategy is to buy weakness to the 200-day simple moving average. This was doable between May 22 and June 10, and again between Aug. 5 and Aug. 20. Note that the low on March 6, 2020, also held its 200-day SMA.

The close of $61.06 on Dec. 31 was an important input to my proprietary analytics. The high of $64.95 set on Feb. 26 was below its annual and quarterly risky levels at $65.08, and $66.90, respectively. The semiannual value level at $57.40 held on Friday, March 6. The close of $59.80 on Feb. 28 was another input to my analytics, and its monthly risky level at $63.51 was tested at the March 3.

The weekly chart for TJX Companies 

Weekly chart showing the share price performance of The TJX Companies, Inc. (TJX)
Refinitiv XENITH

The weekly chart for TJX is negative, with the stock below its five-week modified moving average of $60.76. The stock is well above its 200-week SMA, or "reversion to the mean," at $45.38. This moving average was last tested as a buying opportunity at $34.74 during the week of Nov. 17, 2017. The 12 x 3 x 3 weekly slow stochastic reading declined to 59.58 last week, down from 68.42 on Feb. 28.

Trading strategy: Buy TJX shares on weakness to the semiannual value level and 200-day SMA at $57.40 and $57.28, respectively. Reduce holdings on strength to the monthly, annual, and quarterly levels at $63.51, $65.08, and $66,90, respectively. The longer-term strategy is to buy weakness to the 200-week SMA at $45.38.

How to use my value levels and risky levels: Stock closing prices on Dec. 31, 2019, were inputs to my proprietary analytics. Quarterly, semiannual, and annual levels remain on the charts. Each calculation uses the last nine closes on these time horizons.

Monthly levels for March were established based upon the Feb. 28 closes. New weekly levels are calculated after the end of each week. New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. A reading above 90.00 is considered an "inflating parabolic bubble" formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered as being "too cheap to ignore," which is typically followed by gains of 10% to 20% over the next three to five months.

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Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.