On Aug. 15, Target Corporation (NYSE: TGT) created a double bottom pattern in its stock price, which fell to $125, revisiting lows last seen on June 9.
The imminent catalyst for Target is its upcoming release of Q2 financial results, scheduled for Aug. 16 before the market opens.
Analysts on Wall Street are anticipating a consensus earnings-per-share (EPS) of $1.43, nearly doubling the figures from the corresponding quarter of the previous year, which stood at $0.77. Notably, Target outperformed earnings expectations in both Q1 2023 with a 16% beat and Q4 2022 with a 35% beat.
While revenue forecasts project a slight decline to $25.2 billion for Q2 2023, compared to $26.03 billion from the same period last year, Target has showcased its ability to surpass revenue predictions by a slim margin in the previous four releases.
Technical Analysis: Target Corp
On the technical analysis front, the stock's price recently dipped below the crucial support at $128, a level that had held during July and August. This decline saw a retest of the lows set back in June.
The stock's attempts in late July to break through the resistance offered by the 50-day moving average were denied, resulting in the most recent bearish price action.
Meanwhile, the relative strength index (RSI), a widely used momentum indicator, has once again entered the oversold territory.
It's worth noting that in a prior instance when Target ventured into oversold territory in late May, the signal didn't yield the expected trend reversal. Subsequently, the company's shares experienced further losses, dropping to $126 by June 1, with the RSI plummeting to the 20 mark.
A retest of the lows around $115 (8% below the current price) hit in June 2020 cannot be ruled out if the company reports weaker-than-expected earnings and trims profit outlooks for the next quarters.
Shares could successfully bounce back on the double-bottom/oversold RSI signal if the Q2 results outperform expectations and the company provides a stronger outlook for the following quarters. In this case, bulls could potentially retest the 50-day moving average resistance mark at $132 (6% higher).
Target's year-to-date decline now stands at 17%, with a substantial drawdown of over 50% from its peak in November 2021. The company's stock is currently trading at levels similar to those seen in January 2020, before the onset of the Covid-19 pandemic.