by Serge Berger | March 6, 2014 8:07 am
“Big Two” retailer Target (TGT) has had a target on its back (pun absolutely intended) since the big data breach from late 2013. As a reminder, in December, Target disclosed that a data breach compromised the information of 40 million credit and debit cards between Nov. 27 and Dec. 15. Initially, as investors tried to make sense of the situation, TGT stock held up, but when Target added on Jan. 10 that the hackers also stole personal information for up to 70 million customers (that number is now 110 million), investors let loose.
TGT stock would fall roughly 13% in a straight line over the next three weeks. Finally in early February, it slowly began to bottom along with the broader stock market.
The “crisis” likely isn’t quite over yet for Target and its stock. On Wednesday, investors got news that Chief Information Officer Beth Jacob resigned. She had been in charge of the firm’s computer systems, as well as its website. This could lead to further executive bleeding in coming weeks and months, which in turn could lead to further headline risk around TGT stock.
In many ways, the massive data theft that Target encountered was a wake-up call to a wide array of industries — or at least investors in those industries — that previously didn’t view them as at risk of major hacker attacks. But as the information age is evolving, so is the importance of data security and in turn the roles of employees and executives in charge. Sally Beauty Holdings (SBH) apparently is the latest such victim, and I unfortunately fully expect many more such cases to take place in coming years. From an investing and trading perspective, these are important to watch.
Interesting enough, TGT stock began to break its 2009 uptrend on the multiyear logarithmic chart long before the date breach announcement in December. In August 2013, Target quickly snapped the uptrend and the data breach only led to follow-through selling in the stock. In many respects, Target stock is now stuck in a fairly neutral position, as in January it dipped below horizontal support (red dotted line), but quickly rebounded back above it.
Through this lens, TGT stock is in no good position to make any longer-standing bets in, neither to the long nor the short side, for the time being.
On the closer-up daily chart, however, TGT stock is at an interesting spot. On Tuesday, it rejected an area that I will term “Resistance 1,” made up of the August 2013 downtrend line as well as the blue 100-day moving average.
Should Target stock be able to overcome this area, currently near $62, a next minor upside target and next resistance level is at $65, where the red 200-day moving average comes in. Should this level also give, then upside opens up into the low $70s in coming months.
By the way, Target’s top and bottom lines were down year-over-year in the fourth quarter. So if TGT stock still can overcome the above-stated levels, it should be respected from an active investing and trading point of view.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
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