Kohl's Discounts Can Attract Shoppers -- Its Share Price Is Another Matter

 | Mar 15, 2017 | 11:12 AM EDT
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Kohl's (KSS) seems to be lumped together with several other retailers -- not for its price point or store layouts or the quality of its merchandise, but rather the company's price chart. KSS had a rally last year with prices climbing to nearly $60 from just $35 in about six months but most of those gains have been wiped out in half the time.

The relatively rapid declines in KSS and other retailers reminds me of the commodity market where an 18-month rally in sugar can get wiped out in five or six months. Let's look at the latest charts and indicators for KSS to see if it will move with the group or blaze its own path.

In this daily bar chart of KSS, above, we can see two upside gaps -- one in August and one in November as KSS rallied. When KSS deflated in December and January there was just one gap to the downside and it was twice as big as the earlier gaps and the volume of shares traded was heavier, too. The intensity of this gap looks like it has set a bearish tone to trading this year. A February bounce in KSS stopped at the underside of both the 50-day and the 200-day moving averages.

The On-Balance-Volume (OBV) line broke its uptrend in January and has been neutral since. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish configuration below the zero line. KSS looks like it is pushing down into some minor support below $40 and the sum of these indicators suggests that this support probably will not hold.

This weekly chart of KSS, above, going back three years, is not encouraging. KSS has failed at the underside of the 40-week moving average line. The weekly OBV line has been moving down sharply the past three months and tells us that sellers have been pretty aggressive in liquidating long positions. The weekly MACD oscillator gave a liquidate longs sell signal at the beginning of January and moved below the zero line last month for an outright sell signal.

This Point and Figure chart of KSS, above, can clearly show where prices need to hold and where a breakdown occurs. If KSS declines to $37 it will be a new low for the move down on this chart. This break, if it should it occur, could open the way for a retest of the 2016 lows and perhaps a deeper decline.

Bottom line/strategy: The price action on KSS has been disappointing to the longs and further price weakness seems likely, in my opinion. A rally and close above $44 could mark a reversal and reprieve but it is not what I would anticipate.

Columnist Conversations

we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
Large-cap, high-quality McKesson (MCK) is too cheap now, at $147.51 or so. The stock hit $243.60 more than 2.5...
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