Target Corporation (TGT) reports earnings in Wednesday's pre-market, with Wall Street analysts expecting profits of $1.62 per share on $18.32 billion in second quarter revenues. Target shares rallied more than 5% after the big box retailer posted in-line results in May and added to those gains into June. However, the uptick stalled below tough 2018 resistance in the low $90s, reinforcing a trading range that has now stretched across 12 months.

The company faces the same headwinds as other retailers, with tariffs coming on line in September and December. Rival Walmart Inc. (WMT) reported healthy growth last week, while mall anchors floundered, indicating that customers are forsaking long-time shopping habits and looking for cheaper alternatives. Target could also benefit from this exodus, but tariff-induced margin compression may outweigh the additional foot traffic.

TGT Long-Term Chart (1995 – 2019)

Long-term chart showing the share price performance of Target Corporation (TGT)
TradingView.com

Target stock rallied out of a five-year consolidation pattern in 1995, entering a strong uptrend that stalled at $38 in 1999. It held up relatively well when the internet bubble burst in 2000, carving a trading range between that level and support in the low $20s. A 2002 breakout attempt failed, generating a final descent into range support in early 2003, ahead of a healthy uptick that posted respectable gains during the mid-decade bull market.

The uptrend stalled in the low $70s in 2007, marking a critical level that was still in play during the fourth quarter of 2018. It fell to eight-year range support during the 2008 economic collapse and turned higher in the mid-$20s in 2009, ahead of a slow-motion recovery wave that completed a round trip into the prior high in 2013. The rally ended abruptly when Target reported a data breach affecting 41 million customers, triggering a deep slide to a two-year low in the $50s.

Bulls finally took control in 2014, generating a breakout that stalled in the lower $80s in the first half of 2015. It then failed the breakout in a complex decline, triggered by the rapid loss of brick-and-mortar market share to Amazon.com, Inc. (AMZN) and other e-commerce juggernauts. The sell-off did extensive technical damage, dumping the stock to a five-year low in June 2017, while a rapid recovery exceed the 2015 high by just four points before stalling in September 2018.

The 2007 high came into play once again in December 2018, when a steep decline undercut that level by around five points before grinding out the third V-shaped pattern in 10 years into the June 2019 high. It turned lower earlier this month and is currently trading at the same level first posted at 2015's peak, indicating that shareholders have booked zero returns outside of dividends during one of the strongest periods in market history.

What to Expect After Earnings

The monthly stochastics oscillator entered a buy cycle in February 2019 that has just crossed into the overbought zone. This isn't bearish, at least in the early stages, predicting that bulls could easily prevail after this week's earnings report. However, it's hard to visualize potent upside after June's failure to break out, while the stock's endless whipsaws will dissuade many sidelined investors from taking exposure, regardless of the news.

Summing up the long-term view, the stock has now posted three higher highs since 2007, but multiple reversals and failures give a decidedly bearish appearance to the multi-year price pattern. Neither longs nor short sellers have benefited from this mixed action, especially when comparing rival Walmart's 12-year 270% cumulative return. And unfortunately for bulls, market inertia is a powerful force that can remain in place for decades once established. 

The Bottom Line

Target's bearish long-term pattern is chock full of failed breakouts and breakdowns, lowering confidence that the stock can engage in a sustained uptrend during a period of growing retail headwinds.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.