by Serge Berger | December 26, 2013 8:55 am
The data theft situation at general merchandise discount retailer Target (TGT) continues to unfold. On Tuesday, Target received information requests from attorney generals in several states concerning the recent data breach.
Target was subject to a hack attack that began on Black Friday and continued until Dec. 15. The data theft compromised 40 million customers’ payment information through malware installed at on store point-of-sale systems.
Victims were customers shopping in U.S. and Canadian Target stores with credit and debit cards, and hackers stole customer names, credit or debit card numbers, expiration dates and card security codes. PIN numbers and Social Security numbers luckily were not stolen. Target is reportedly fully cooperating with federal authorities, including the Secret Service and Department of Justice.
As a result of the data theft, more than two dozen federal class action lawsuits have been filed thus far, accusing Target of being negligent and lacking adequate systems to protect customer privacy. Since the news on the data theft is out, TGT stock has been trading lower close to 8%, and the Target stock chart continues to look weak.
If we look at TGT stock from a multi-year perspective, note that its year-to-date highs from July can now be looked at as a double top, which marginally surpassed its previous highs dating back six years prior to July 2007. With the recent slide, TGT stock has now broken its 2009 up-trend, which not many stocks have done, thus exhibiting both relative and absolute weakness.
But the thing with broken multi-year uptrends in cyclical bull markets is that they can quickly reverse back up … so shorting a stock for more than a swing trade is a low-probability move. For most investors and traders with time horizons of more than a couple of weeks, the broken uptrend should be taken seriously … for now. However, other than reducing long positions in Target stock, this is neither a place to go short nor a spot to add significantly to long positions.
The daily chart shows that Target stock, after falling from its July top, saw a rebound in October and November, which however came to an abrupt halt on Nov. 20, when TGT bumped into its 200-day simple moving average (red line). On Tuesday, TGT stock again made a lower low vs. its early October lows, which now sets the stock up for a next near-term downside target closer to $59.
Short-term traders with quick trigger fingers could try a short-side stab based on this, but traders and investors with time-frames of more than a few weeks are better off staying away from TGT stock for the time being.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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