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Stocks  | April 13, 2020

Kohl's Corporation (KSS) is a stand-alone department store that has been hurt by closures due to COVID-19. The retailer offers brand-named apparel, shoes, accessories, and home and beauty products at affordable prices.

Kohl's has a relationship with, Inc. (AMZN), as consumers who buy online using Amazon can drop off returns at Kohl's stores. With most consumers locked down at home due to the pandemic, the stock has plunged, but it is recovering in April.

Kohl's stock closed Wednesday, April 8, at $17.52, down 65.6% year to date and in bear market territory at 76.9% below its 52-week high of $75.91 set on April 23, 2019. The stock is also in bull market territory at 60.9% above its April 3 low of $10.89.

The stock is extremely cheap fundamentally, with a P/E multiple of 3.48 and a dividend yield of 16.56%, according to Macrotrends. Odds are that this dividend will be cut significantly or even suspended until stores can be open again. 

The Daily Chart for Kohl's 

Daily chart showing the share price performance of Kohl's Corporation (KSS)

The daily chart for Kohl's shows that the stock has been below a "death cross" since on Dec. 24, 2018, when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices would follow. The trading strategy when this occurs is to sell strength to the 200-day simple moving average, and the chart clearly shows several opportunities to sell at $70.00 and above between Jan. 9, 2019, and May 1, 2019. The 200-day simple moving average was also tested at $56.82 on Nov. 14, 2019, which was another opportunity to reduce holdings.

The price gap lower on May 21, 2019, was caused by a negative reaction to earnings. Another price gap lower on Nov. 19 was another negative reaction to earnings. The stock began 2020 below its 50-day simple moving average at $51.19 and plunged to its April 3 low of $10.89. Kohl's stock currently trades below its monthly risky level at $25.52 and its quarterly risky level at $36.69.

The Weekly Chart for Kohl’s

Weekly chart showing the share price performance of Kohl's Corporation (KSS)

The weekly chart for Kohl's is negative but oversold, with the stock below its five-week modified moving average at $25.67. The stock is also below its 200-week simple moving average, or "reversion to the mean," at $52.66. The 12 x 3 x 3 weekly slow stochastic reading is at 10.74, up from 9.44 on April 3. This made the stock "too cheap to ignore" as April began, which was a buy signal. 

Trading strategy: I do not have a value level. My call is to sell Kohl's shares on strength to the monthly and quarterly risky levels at $25.52 and $36.69, respectively.

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