Retail Earnings week is upon us as several retail chains are set to announce their quarterly earnings results this week. Earlier this morning, Macy’s Inc (NYSE:M), Home Depot Inc (NYSE:HD) and Wal-Mart Stores Inc (NYSE:WMT) released their results, helping each of these stocks get off to a bullish start for the week.
Looking at each of their charts shows three very different pictures that we’ll look at in today’s three big stock charts.
Macy’s Inc (M)
Macy’s reported quarterly results that beat on the bottom line though missing on revenue. The retailer also reported the timeline for the transition of power at the CEO level. M shares are about 3% higher after the report and put the stock in place for some resistance to stall any rally.
Macy’s shares transitioned into a bearish trade trend on Dec. 30 as the 50-day moving average rolled over into a declining pattern. Since then, M stock has lost roughly 25% of its value.
Macy’s stock recently rallied from an oversold reading of its RSI to take shares from $30 to $33 as it appears that investors were willing to buy the rumor on earnings, especially with a change of leadership coming.
While M shares aren’t overbought yet, the stock will hit technical resistance at $33.65 and then again at $34. This is from the stock’s declining 50-day and then the round-numbered value of $34.
Just overhead are Macy’s 100- and 200-day moving averages, which will also add to potential for overhead resistance if the shares can reach to $35.50. These trendlines are also in a bearish pattern and more likely to put a lid on any short-term rally.
Bottom line, the Smart Money that was buying on the oversold bottom in January will be selling into this rally’s strength.
Home Depot Inc (HD)
Another retailer that reported better-than-expected results this morning was Home Depot. The big box hardware company beat expectations by $0.11 and beat top-line revenue expectations. HD’s top line grew 5.8% year-over-year as well.
Home Depot stock will see a continuation of its bull run as the stock broke outside of its top Bollinger Band last week ahead of the earnings report. At the same time, HD shares are trading in overbought territory. We’re expecting to see some carryover in the volatility rally as more investors jump on this bandwagon.
Home Depot shares are one of the few that are trading above their respective 20-month moving average. This makes HD stock one of the most attractive, along with shares of competitor Lowe’s Companies, Inc. (NYSE:LOW) within the retail sector.
With HD breaking into new all-time high territory, we expect the current rally to target the round-numbered $150.
Wal-Mart Stores Inc (WMT)
Finally, sticking with the bullish retail theme, Walmart also dropped positive earnings results on the market this morning. The mega retailer missed on the top line, beat the bottom and guided in-line. Par for the course this earnings season.
What is more interesting about WMT is the technical transition that the shares have been achieving lately.
After bottoming at $66 in February, Walmart shares have been on a rally that now has them crossing above their 50-day and 100-day moving average. After this morning’s announcement, WMT stock is likely to take out its 200-day trendline, all within two trading days.
The improvement in Walmart stock’s trends shows all three of these key trendlines transitioning into a bullish intermediate-term pattern. This suggest that WMT stock is setting itself up for a strong three to six month run that is likely to outpace the rest of the market and generate alpha for portfolios.
From a sentiment perspective, we love the fact that only 37% of the analysts that cover Walmart stock with a buy rating. This means WMT stock is ripe for upgrades as we continue to see a turnaround in the fundamental number as well as the technical charts.
Watch for some consolidation at $70 as Walmart will be a little overbought for the short-term traders, but the intermediate-term charts are suggesting targets north of $80 as the company officially moves back into bull market mode with a break above $71.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
