Big tech wasn’t the only industry that benefitted from Covid-19. The pandemic also gave a strong sales boost to grocery chains such as Target. The work-from-home wave redirected demand from the leisure and travel industries to companies selling basic necessities. After all, people have to eat even in a viral disease-induced recession.
Sales at Target grew 19.8% in its fiscal year ending January, 2021, and then another 13.3% in fiscal 2022. But in fiscal 2023, revenue growth moderated back to its usual pace of around 3%. The market woke up from its dream of perpetual double-digit increases and re-rated the stock down to a more realistic level. TGT reached an all-time high of $269 in mid-November, 2021. Earlier this week, it barely held above $125, down 53.5% from its peak.
Seeing your investment getting cut in half is always painful and a lot of bulls have certainly given up by now. Ironically, it is at the moment of maximum pessimism when a recovery suddenly begins. Has Target reached it? The Elliott Wave chart below suggests it might have.
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The daily chart of TGT stock shows that the plunge from $269 to $125 is a five-wave impulse. We’ve labeled the pattern 1-2-3-4-5 in wave A, where wave 4 is an a-b-c-d-e triangle correction. According to the theory, a three-wave correction in the opposite direction follows every impulse. So if this count is correct, we can expect a recovery to $180-$200 per share in wave B. From the current price level of $138, that would be a 30% to 45% rally. The MACD indicator supports the mid-term positive outlook with a strong bullish divergence between waves 3 and 5.
On the other hand, once wave B is over, the bearish 5-3 Elliott Wave cycle from the top at $269 would be complete. It would be time for another notable selloff in wave C, whose targets lie below the bottom of wave A. We wouldn’t be surprised if Target stock gets cut in half again, from the vicinity of $200 to roughly $100, especially in the case of a recession.
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