The stock of Kohl's Corp. (KSS) was reviewed last week, and I wrote that, "We have upside targets of $85 and $90 for KSS so the burning question is where should we consider buying more and what should we risk now? Traders could try to add to longs on a dip to around $74 if available. Stops could be raised to $66."
Viewing the price action over the past two days as a potential top reversal pattern could mean an adjustment to our technical game plan. Let's look closer.
(Kohl's is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells KSS? Learn more now.)
In this daily bar chart of KSS, below, we can see a pattern called "a close below the low of the high day". This quick-turning pattern is like a two-day reversal. KSS made a high on Tuesday and it looks like KSS will close below the low of Tuesday. A weak close today means that a lot of recent longs will go home with a loss tonight.
Traders who are diligent about controlling risk or do not have deep pockets will become sellers on Wednesday's close and Thursday. Prices are still well above the rising 50-day moving average line as well as the slower 200-day line.
The daily On-Balance-Volume (OBV) line moved up with prices from late May but a high could be seen now.
In the bottom panel is the Moving Average Convergence Divergence (MACD) oscillator which has begun to narrow. Often a narrowing of the two moving averages that make up this indicator leads to a crossover signal.
In this weekly bar chart of KSS, below, we can see that prices are retesting the highs of early 2015. Prices did not stay in the $75-$80 area for long back in 2015 so one could make the argument that this prior high may not be significant resistance.
Prices are still above the rising 40-week moving average line but this is a lagging indicator. The weekly OBV line has made a new high this month to confirm the price gains.
The weekly MACD oscillator shows a much different picture than the daily indicator. Here the weekly indicator has turned up to a new outright go long signal.
In this Point and Figure chart of KSS, below, we can see a strong advance of X's and the start of a down column of O's.
This chart is a "traditional" 1x3 Point and Figure chart and last week we used a "percentage change" chart which gave us an upside price of $85.
Bottom line: There is an increased risk that a top reversal is being made now. Traders should consider nailing down profits.
