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Target Corporation Pulling Back After An Upside Breakout

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Target Corporation Pulling Back After An Upside Breakout
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Target Corporation (NYSE: TGT) stock easily broke out above the long-term downtrend line resistance and the potential upside Fibonacci “correction resistance” level at the $62.25-$62.41 range. That was a level that was highlighted in Benzinga's last Target check-in on September 8.

Now that the breakout has taken place, what does the upside picture look like?

What The Bulls See

  • An opportunity to buy into a true “catch up” trade candidate, where a stock will outperform the indices drastically for a short period of time just so it can play “catch up” with the market.
  • A stock with cheap valuation metrics: price-to-book comes in at 2.36; price-to-sales is only 0.53; enterprise value trumps its market capitalization, and EPS growth estimate for next year eclipses its PE (based on 2015 estimates) of 15.
  • A nice 3.4 percent dividend yield.
  • A price chart that foretells higher prices still to come.

Related Link: Schlumberger Limited Has Rewarded Bears

What The Bears See

  • Razor thin net profit margins of 2.07 percent.
  • Relatively high debt ratios: 86.34 percent debt-to-equity ratio and only a 1.02 current ratio.

The Technical Take

Technicians note that shares broke out above its “correction resistance” level at $62.41 and now have projected upside targets of $65.13 and $66.80, both Fibonacci-generated numbers. Once the stock shows signs of topping out at one of those levels, the technicians believe a modest consolidation or correction should commence.

Bulls will be looking to enter Target shares on any pullback to the $62-$62.50 price range in advance of what they believe will be a continued move up to the $65.13-$66.80 resistance range. Bears should be careful about staying involved in Target on the short side after the stock's recent breakout.

Stock chart: 
Stock chart

Posted-In: Long Ideas Technicals Top Stories Intraday Update Trading Ideas Best of Benzinga

 

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