Discount apparel retailer TJX Cos. (TJX) had a double whammy Tuesday, reporting better-than-expected second-quarter results and raising its fiscal-year earnings guidance. In response, TJX stock took a sizable leap and bumped right into a key medium-term technical resistance level.
Now, TJX sits at a critical juncture that will allow active investors to take advantage of a good risk/reward trade in the near future.
TJX reported earnings per share of 75 cents per share, up 14% year-over-year and better than the consensus estimate of 73 cents. Revenues of $6.91 billion also topped estimates, and were powered by same-store sales that grew 3% YOY.
To top it all off, TJX raised FY 2014 earnings guidance from a range of $3.05-$3.17 per share to a range of $3.10-$3.18. Analyst estimates stood at $3.14 per share.
TJX Stock Charts
Looking at the logarithmic multiyear weekly chart of TJX stock, note that after an initial sharp rebound off the 2009 lows, TJX slipped into a more orderly ascent, oscillating back and forth in an uptrending channel. The stock then formed a mini double top with its highs from last November and this January, from which it began to slide; TJX eventually found support at the lower end of the range (blue parallels) in late June.
From this perspective, as long as the June lows hold, TJX stock is in good shape to move higher.
Looking at the daily chart, Wednesday’s big rally began right out of the gates, and TJX never looked back. Technically speaking, Tuesday’s gap up should be labeled a breakaway gap, which is very bullish and argues for further inclines in the stock in the medium term. Tuesday’s move unsurprisingly came on a monster jump in volume — TJX stock usually trades around 4 million shares per day, but on Tuesday it saw volume of close to 16 million.
But while Tuesday’s post-earnings rally was positive and also pushed the stock right past its 50- and 100-day simple moving averages (yellow and blue lines, respectively), TJX stock did settle the day right at confluence resistance made up of the January diagonal resistance line (black) as well as the 200-day SMA (red line).
Active investors now have two options:
- Buy the stock on a push past Tuesday’s intraday highs for a move into the low to mid-$60s.
- Wait for TJX stock to consolidate a little, then initiate a long position on an eventual push past Tuesday’s highs.
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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.