Trade of the Day: Kohl’s (KSS)

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The “death cross” that formed on Kohl’s (KSS) chart in July at $63 was a great precursor pointing to lower lows. Shares of Kohl’s are near their 52-week low of $44 and will likely test fresh lows on another drop below $45. Resistance is at $47-$47.50.

KSS1

On the longer-term chart, Kohl’s shares are approaching multi-year support levels at $42.50-$40. Because I see Kohl’s could drop as low as the $40s, so a bearish put option trade is my best strategy here.

KSS2

Buy the KSS November 42.50 puts (KSS151120P00042500) at current levels.

My exit target is $1.90, and I do not have a stop loss in place. Instead, I will be watching Kohl’s chart for a signal that it might reverse and move higher to let me know when to exit.

But I think KSS is going to continue dropping. If Kohl’s can test $40.70, technically, by mid-November, these options should double from our entry price.

Kohl’s missed earnings by $0.09 a share last quarter and has fallen short of Wall Street estimates in two of the past four quarters. Current estimates have the company earning $0.74 a share for the current quarter on revenue of $4.45 billion. This is the same estimate as the year-ago period in which the company missed by $0.04.

I have a feeling that analysts haven’t done their homework, and Kohl’s could be setting up for a disappointing announcement. Earnings are scheduled to be released in mid-November.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/10/kohls-kss/.

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