Don’t View Target Corporation as More Than Just a Trade Right Now

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TGT stock - Don’t View Target Corporation as More Than Just a Trade Right Now

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Three weeks ago, I suggested Target Corporation (NYSE:TGT) was trapped between a rock and a hard place. That is, between a stepped-up brick-and-mortar effort from Wal-Mart Stores Inc (NYSE:WMT) and the growing dominance of e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN), Target may never thrive again. Survive? Yes. Thrive? Doubtful.

That wasn’t to say TGT stock was and would forever more be un-ownable, however. Indeed, if nothing else, the reliable TGT stock dividend has a certain appeal, and odds are good that Target stock will from time to time become undervalued, setting the stage for a quick bounce.

This may well be one of those times.

TGT Stock Perking Up

Just for the record, my point from November was and still is, “It’s just hard for a third-tier player to catch up with two behemoths doing battle with one another. Between the two efforts, consumers can usually find something they like about one or the other, often forgetting about the third option.” I also made clear, however, that “Target is not going to be defunct in the foreseeable future, and TGT stock isn’t en route to zero.”

Translation: If you can pick and choose the right spot, there’s money to be made here. And as it stands right now, there appears to be some upside brewing.


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It’s not a tough chart to interpret. TGT stock has been trending higher since hitting bottom in June of this year, leaving behind a string of higher lows and higher highs. Perhaps just as telling is the fact that Target stock has moved above all of its key moving average lines, and the short-term moving average lines have all moved above longer-term ones.

Perhaps more than anything though, we’ve seen volume grow on the way up, suggesting more and more people are piling on as the stock’s price rises, sustaining the rally.

We’re seeing this clue in a couple of different ways. In a straightforward (albeit unclear) way, the raw volume data at the bottom of the image shows the green bars are taller than the red bars, and the green bars are getting progressively taller. In the middle of the chart we’re seeing a Chaikin line that’s not only above zero, but a Chaikin line that appears to be rising again; the Chaikin oscillator is, in simplest terms, a volume-weighted momentum indicator.

In both cases the hint is the same — this rally has growing participation. That’s the good news. The bad news is…

TGT Earnings Outlook is Lackluster

Don’t confuse near-term bullishness with long-term bullishness. The tide may be taking a turn for the better, but not for a fundamental reason. The tide is taking a turn for the better because — and only because — the market has been nothing less than brutal to Target since mid-2015, with things turning particularly ugly late last year and early this year.


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This graphic explains why, and does so rather succinctly. While revenue growth hasn’t been a problem, it has not been problem-free revenue growth. Bigger rivals like Wal-Mart and Amazon have forced Target to spend and discount more than it has in the past, and the pros think more of the same is in the cards going forward.

A horrifyingly bad outlook? No, not at all. In fact, a closer look at the graph indicates modest revenue growth and stabilization of the earnings trend by 2019. It’s a marginal improvement though, from a company that can’t afford to put up “just marginal” improvements.

Bottom Line for TGT Stock

In simplest terms, there may be enough psychological fuel for a decent short-term trade here. There’s not yet enough reason to view Target stock as a long-term holding though.


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Target-wise (in terms of a specific price objective), the most meaningful line in the sand that’s evident right now is $71.55, where you’ll find the 61.8% Fibonacci retracement of the span from the mid-2015 peak to the mid-2017 trough.

It may look and feel a little arbitrary, but it’s not. Fibonacci lines provide a technical — and psychological — context when there’s little other trading context on a chart. In fact, you can already see TGT stock has found a ceiling at the other key Fibonacci retracement line (the 38.2% retracement) as $62.73.

Until that hurdle is cleared, the target at $71.55 is mostly irrelevant. If and when the current ceiling is broken though, the momentum that has built thus far could be unleashed in a way that carries the stock to the mid-$71 area.

Again though, there’s little reason to justify a move beyond that mark. This retailer has still got plenty of bigger-picture problems to solve.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.


Article printed from InvestorPlace Media, https://investorplace.com/2017/12/target-corporation-tgt-stock-trade-only/.

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