Discount Retailers Kohl's, Ross, TJX Report Earnings

Department store Kohl's Corporation (KSS) offers brand-name apparel, shoes, accessories, and home and beauty products. The stock closed Friday, Nov. 16, at $72.49, up 33.7% year to date and in bull market territory at 38% above its 2018 low of $52.52 set on Jan. 4. The stock set its 2018 high of $63.28 on Nov. 12 and is in correction territory since then, down 14.6%.

Discount retailer Ross Stores, Inc. (ROST) offers off-price brand-name apparel and household goods and had strong momentum going into November. The stock closed Friday, Nov. 16, at $95.28, up 18.7% year to date and in bull market territory at 28.8% above its 2018 low of $74.00 set on Feb. 9. The stock set its 2018 high of $104.35 on Nov. 8 and is 8.7% below this level.

The TJX Companies, Inc. (TJX) is the parent of discount retailers TJ Maxx, Home Goods and Marshalls. As a consortium of names, the company also offers off-price apparel and household goods. The stock closed Friday, Nov. 16, at $51.49, up 34.7% year to date and in bull market territory at 41.4% above its 2018 low of $36.41 set on Feb. 9. The stock set its 2018 high of $56.64 on Oct. 1 and is 9.1% below this level.

All three of these discount retailers report earnings before the opening bell on Tuesday, Nov. 20. Kohl's is expected to post earnings per share of 96 cents to $1.04. Analysts predict that Ross Stores will post EPS of 90 cents, while TJX is expected to report earnings of 61 cents per share. Strong retail sales for October should be positive for department stores, but that is not reflected in the share price weakness seen last week. While it is likely that the discount retailers will beat earnings estimates, the charts suggest that good news on earnings is priced in for all three.

The daily charts show that Kohl's traded below its 200-day simple moving average at $70.38 on Friday but closed above it. Ross Stores and TJX Companies are well above their 200-day simple moving averages at $86.82 and $37.35, respectively.

The weekly chart for Kohl's

The weekly chart for Kohl's is neutral, with the stock below its five-week modified moving average of $75.45. The stock is well above its 200-week simple moving average, or its "reversion to the mean," now at $53.30. The 12 x 3 x 3 weekly slow stochastic reading is ended last week at 47.26, up from 42.55 on Nov. 9.

Given this chart and analysis, my trading strategy is to buy Kohl's shares on weakness to my semiannual and annual value levels at $57.83 and $50.50, respectively, and to reduce holdings on strength to my monthly risky level at $77.53.

The weekly chart for Ross Stores

The weekly chart for Ross Stores is negative, with the stock below its five-week modified moving average of $97.09. The stock is well above its 200-week simple moving average of $64.77, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading slipped to 71.80 last week, down from 75.48 on Nov. 9.    

Given this chart and analysis, investors should buy shares of Ross Stores on weakness to my quarterly and annual value levels of $90.13 and $85.13, respectively, and reduce holdings on strength to my monthly risky level of $100.30. My semiannual pivot is $95.67.

The weekly chart for TJX Companies

The weekly chart for TJX Companies is negative, with the stock below its five-week modified moving average of $53.71. The stock is well above its 200-week simple moving average of $38.79, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading fell to 68.06 last week, down from 73.63 on Nov. 9.

Given this chart and analysis, investors should buy TJX shares on weakness to my annual and quarterly value levels of $49.55 and $48.98, respectively, and reduce holdings on strength to my monthly risky level of $57.65. My semiannual pivot is $50.87.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.