WWM - Analytics

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Today’s Trading Edge: Kohl’s shares rally after considering breaking up company and going private

WWM_KSS_JAN_11_2016.jpgKohl's Corp (KSS) shares surged after the Wall Street Journal reported that the company is considering taking itself private or considering breaking off part of the its business. The possible sale of the company may be difficult since the company’s market cap is $9.5 billion and they have over $5.1 billion in debt.

Price action on the KSS daily chart shows formation of bearish ABCD pattern on January 7th. The reversal pattern took price back towards the 100-day SMA (currently trading at $47.64), where it currently is finding key support. If continue to see bullish momentum take price above the $52.06 level, we could see price have a clear path towards the $56.27 level, which is 38.2% Fibonacci retracement level of the $79.60 to $41.86 move. If the bullish move extends itself, major resistance will come from the 200-day SMA, which currently trades at the $57.31 level.

If the current rally is short-lived, initial support will come from the $46.50 area. Only a break below the $45 handle open the door for a deeper correction. Deeper support may target the psychological $40 level    

The Trade: Buy KSS at $48.50, with a stop loss at $46.50 and a take profit at $54.50. The Risk/Reward Ratio is 1:3



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