Tractor Supply Co. (TSCO) reported third-quarter earnings last Thursday. In our last review of TSCO back on April 27 we wrote, "Traders should continue to hold existing TSCO longs and consider adding to those positions at current levels. Raise sell stops to $170 from below $130. The $222 area and then the $261 area are our price objectives for now."
Let's check the charts again.
In this updated daily bar chart of TSCO, below, we can see that traders should be still long as our $170 stop was not reached even as prices pulled back in June and July. The rally carried into September before we saw another correction. Overall the chart is now mixed. Prices show two highs just above $210 to show some hesitancy to move higher. TSCO is trading above the rising 50-day and bullish 200-day moving average lines but the On-Balance-Volume (OBV) line shows a decline from May, telling us that sellers have been slightly more aggressive these past months. The trend-following Moving Average Convergence Divergence (MACD) oscillator is below the zero line in sell territory.
In this weekly Japanese candlestick chart of TSCO, below, we see a mixed picture. I can see a couple upper shadows above $210, telling us that traders are rejecting those price levels. The slope of the 40-week moving average line is positive but another correction could mean a test of this indicator. The OBV line has not made a new high since April and this is a bearish divergence when compared to the price action. The MACD oscillator has made a lower high from May and that is another bearish divergence.
In this daily Point and Figure chart of TSCO, below, we can see an upside price target of $225, but a trade at $190.64 will weaken the picture.
Bottom line strategy: TSCO could trade higher with strength in the broad market averages, but some bearish divergences suggest we may see a sideways to lower correction in the weeks ahead. Traders who are long should raise stops to $190 from $170. We may still reach our $225 price target and that is probably a good location to take profits.
