Target Gaps Higher On A Positive Reaction To Quarterly Earnings

Target
TGT
beat earnings expectations before the opening bell on Tuesday, March 1. Shares gapped higher as the pandemic resulted in an increase in customers. Fourth quarter sales grew by a solid 9%. The big box retailer expects continued growth in the upcoming quarters.

The stock closed Monday at $199.77, down 13.7% year-to-date and 25.7% below its November 15 high of $268.98. It’s 39.3% above its September 8, 2020 low of $143.38. Target closed Monday at $199.77 and traded as high as $227.10 this morning, up 13.7%. It gapped above its semiannual and monthly pivots at $218.95 and $223.08, respectively, and these levels should act as magnets on weakness.

Target is reasonably priced. Its p/e ratio is 15.29% and the company offers a dividend of 1.81%, according to Macrotrends. The retail giant beat earnings-per-share estimates in 11 consecutive quarters.

The Daily Chart for Target

Shares of Target were above a golden cross 52 weeks ago. This puts the 50-day simple moving average well above the 200-day simple moving average. This tracked the stock to its November 15 high of $268.98.

Then came the bear market decline. From this high to the February 24 low of $184.00 the stock dropped 31.5%. During the decline there is a death cross that formed on January 20 when the 50-day SMA declined below the 200-day SMA.

The upper most horizontal line in the chart is the quarterly risky level at $244.75. The two horizontal lines at the center of the chart are the monthly and semiannual pivots at $223.08 and $218.95. The lowest horizontal line is the annual value level at $185.55, which provided a buying opportunity on February 24.

The Weekly Chart for Target

The weekly chart for Target will be upgraded to positive if the stock ends this week above its five-week modified moving average at $216.39. It’s well above its 200-week simple moving average or reversion to the mean at $140.97. The 12x3x3 weekly slow stochastic reading is rising at 17.27. When this rises above 20.00 the weekly chart will be positive. During the week of February 25 this reading was 9.60, well below 15.00, which is the threshold for being “too cheap to ignore.” This supported the buy at the annual value level at $185.55. The low for the week of February 25 was $184.00.

Trading Strategy: Buy Target on weakness to its semiannual pivot at $218.95. Reduce holdings on strength to its quarterly risky level at $244.75. Consider a sell stop on a close below the 50-day simple moving average, now at $217.33.