With the albatross of a credit card security breach still hanging around its neck, it is no wonder that retail giant Target (NYSE: TGT) is out of favor on Wall Street. 

#-ad_banner-#In just the past week we’ve seen Cowen & Co.’s Consumer Tracking Survey report “meaningful decreases” in customer satisfaction. And Standard & Poor’s lowered the company’s credit rating a notch to A.

But the charts tell a different story, and it is a good one. 

We can attribute the February rally, following weak fourth-quarter results, to excessive pessimism. The news was bad, but not as bad as expected, and shares soared. And now after a four-week slide, it looks as if TGT is ready to break out again. (My colleague Marshall Hargrave made a similar call in January.)

The February rally pushed the stock above the 50-day moving average for the first time since the data breach was reported in December. And the March pullback found support back at the moving average in what chart watchers call a successful test of the initial breakout. Johnny-come-lately bulls had a second chance to buy — and they took it.

On-balance volume, which keeps track of the net volume traded on up days and down days, has been rising since February. This is another positive change since the data breach, although this indicator declined for much of last year. But money is flowing back in, so we’ll take it. 

Basically, we have a stock that was given up for dead making a surprise jump on what should have been bad news. It then took several weeks off to allow enthusiasm to fade once again, and now is knocking on the door of another upside technical breakout and bullish reversal of trend. 

Indeed, TGT poked above the trendline Thursday, prompting some traders to buy. However, a close of $61.25 or higher would be the official signal for most traders. And if successful, the first upside target would be resistance set by the bottom of last year’s March-June trading range, the August gap down, and the November high in the $67.50 area.

Action to Take –> 
— Buy TGT at $61.25 or above
— Set stop-loss at $58
— Set initial price target at $67.50 for a potential 10% gain in six weeks

This article was originally published at ProfitableTrading.com: 
Maligned Retailer Poised to Make a Double-Digit Comeback

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