Chart(s) of the Day – The Big 3 of Retail, $WMT, $COST, $TGT

by Enis February 18, 2014 1:53 pm • Commentary

The big-box retailers have been weak in the past 6 months as the headwinds for the U.S. consumer have added up.  WMT, COST, and TGT are three of the biggest American retailers.  All 3 stocks are down at least 3% on the year, a clear indication of investors’ distaste for the sector.

COST has been the best performer of the big three over the past 5 years.  In that time, the stock more than tripled.  December and January were the first time COST has been down for 2 straight months since mid-2012, but the stock actually held its multi-year uptrend:

COST weekly, Courtesy of Bloomberg
COST weekly, Courtesy of Bloomberg

The low for COST on the most recent selloff was right around $110, which was also support in August and October.  That is a crucial support level for the stock going forward.  Meanwhile, the stock closed 2013 at $119.02, which it has not touched since the first day of trading in 2014.

WMT is the behemoth in American retail, at almost $500 billion in annual sales, and a $250 billion market cap.  The stock has been rangebound between $70 and $80 for much of the past 18 months, but it has held its long-term breakout above the $70 level:

WMT monthly, Courtesy of Bloomberg
WMT monthly, Courtesy of Bloomberg

While $70 is obvious support, the stock’s all-time high of $81.37 was set in early December.  $80 is the main resistance area.

While COST and WMT are still trading above long-term support, TGT has broken multiple levels of support in the past 6 months.  The company’s Canadian expansion has gone poorly, hurting its earnings in the second half of 2013, and leading to breakdown below the $70 breakout level.  The earnings woes were exacerbated by the credit card breach late in the year, which led to a break of $60 support:

TGT weekly, Courtesy of Bloomberg
TGT weekly, Courtesy of Bloomberg

The stock’s February low was $54.66, which was essentially the stock’s May 2012 low as well.  No support below there until the $50 level.

There was a buyer of 5k of the TGT Feb28th 53 and 52 puts, paying 0.39 for both (called a put stupid).  Earnings for TGT are on Feb 26th.

Retail got off to a rough start in 2014.  All 3 of these companies report earnings in the next 3 weeks (starting with WMT on Thursday morning).  We’ll be watching the above technical levels for indications of a continuation of that downtrend, or a shift in the market if the big 3 can regain strength above those levels in the coming months.