Target Shares to Complete Long-Term Reversal Pattern on Earnings Release?

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Target shares are currently awaiting the release of the first quarter earnings results, with investors bracing for more downbeat consumer data. On the daily time frame, Target shares are in the middle of completing a double top pattern, a classic sign that longer-term losses are likely.

Price is still away from the neckline around $67.50 but a break below this area could spur a drop to the next support at $55.00. On the other hand, if this area holds as support, another move towards the tops at $85 could be seen.

Stochastic is already indicating oversold conditions, which means that sellers are taking a break and letting buyers take over for now. Similarly, RSI is in the oversold area so there might be some profit-taking activity ahead of the earnings release.

Earnings from other top retailers such as Nordstrom, Walmart, Macy’s and JC Penney have painted a bleak picture of the consumer sector, which suggests that Target’s numbers could disappoint as well.

Analysts polled by FactSet are expecting earnings of $1.19 per share, up from $1.10 for the same period last year. They’re also expecting sales of $16.3 billion, down from $17.1 billion for the same period last year. Keep in mind that Target sales fell short of forecasts in the previous quarter, capping off eight consecutive quarters of stronger than expected sales.

Management guidance could also have an impact on where Target shares could be headed after the earnings call. As of their previous release, management expects same-store sales to increase between 1.5% and 2.5% for the fiscal year. Disappointing data could lead to a test of the neckline support with stronger selling pressure likely to trigger a break lower in the coming weeks.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.