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 stock closed Friday, May 17, at $53.04, up 18.6% year to date and in bull market territory at 27.8% above its Dec. 24 low of $41.49. This strength is a consolidation of the bear market decline of 26.7% from its all-time intraday high of $56.64 set on Oct. 1 and its Dec. 24 low.

TJX is set to report earnings before the opening bell on Tuesday, May 21, and analysts expect the retail conglomerate to post earnings per share of 55 cents. The stock is overvalued with a P/E ratio of 22.23 and a dividend yield of 1.75%, according to Macrotrends.

Some analysts believe that gains in same-store sales should remain a positive. This was reflected with increasing foot traffic, which is a metric to keep an eye on Tuesday morning. Overhead problems include rising costs in shipping, increased IT spending and higher cost of labor. The retailer has not been focusing heavily on e-commerce, counting on consumers searching the shelves for quality items.

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 stock is trading between its 200-day simple moving average at $51.47 and its 50-day simple moving average at $53.54.

The close of $44.74 on Dec. 31 was an input to my proprietary analytics – still in play is its semiannual value level at $44.84, where the stock could have been bought as 2019 began. Its annual risky level remains at $56.51. The close of $53.21 on March 29 was another input and resulted in a second quarter value level at $50.84. The April 30 close of $54.88 was also an input, and the value level for May is at $49.13.

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 $53.37. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $41.00. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 74.39 this week, down from 80.09 on May 17. At the April 26 high, this reading was 91.14, above 90.00 as an "inflating parabolic bubble," and this bubble is popping.   

Trading strategy: Buy TJX stock on weakness to the 200-day simple moving average at $51.47 and then to its quarterly and monthly value levels at $50.84 and $49.13, respectively. Reduce holdings on strength to the annual risky level at $56.51.

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February, March and April. The quarterly level was changed at the end of March.

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.

Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."

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