Target (TGT) –This retail chain operates over 1,900 stores in the U.S. and Canada. Its reputation was tarnished during the holiday season by a massive security breach of its database.
As a result, the company lowered its fourth-quarter earnings guidance to a range of $1.20-$1.30 versus a prior $1.50-$1.60. When it reported Q4 EPS of $1.30 on Feb. 26, the stock gapped up from $56.61 to $58.10.
But in addition to the damage to its reputation, the severe winter weather has hurt in-store sales. And the company has been criticized for its meager online inventory, while other retailers with better website offerings have been able to better offset the negative impact of the weather.
The stock was not acting well even before the breach of its credit card database. It broke down in August on a price gap at about $68, and for four months, appeared to be forming a base. However, on Jan. 14, the stock fell through a triple-bottom, hitting a low at $54.66 on Feb. 5. TGT bounced to its bearish resistance line but appears incapable of punching through it.
The recent gap up at $56.61 to $58.10 now becomes the downside objective. Sell TGT short at the market price with a target of $57. A stop-loss should be placed at $63 on the close. Note that short-selling is a speculative technique that is not suitable for all investors. Check with your broker for any special restrictions and the ability to borrow shares.