The late-April and early May bounce off the 200-day moving average took the stock close to the level from which it broke down earlier. It also ran into its 50-day moving average, which is now acting as resistance.
This is called a test of the breakdown, and it gives bears missing the initial break a second chance to sell. With the 50-day average also curling to the downside, the path of least resistance is lower, and it would not take much to push the stock below its April low near $64.
The April low has additional significance besides being at the 200-day average. It was also support from the twin highs of 2014, as well as the 38.2% Fibonacci retracement of the 2014-2015 rally. Therefore, a move below that level would likely have some legs, and a drop to support and the 61.8% Fibonacci retracement level seems likely.
Fibonacci levels are controversial in some circles because there is no solid proof that the market targets them. However, traders do keep an eye on them, and that can make them important as directional guides, if not actual targets. For our purposes, we can say that a break of support has reason to continue lower until proven otherwise.
Recommended Trade Setup:
-- Sell TJX short at the market price
-- Set stop-loss at $69
-- Set initial price target at $59.25 for a potential 11% gain in five weeks
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