My process involves regularly scanning for stocks that hit new three-month highs. Over the years, this technique has helped identify stocks that have just emerged from a consolidation phase, allowing you to track their trends as initial breakouts lead to further profits. This week I noticed a lot of old school retail stocks showing up on the list. One such stock, TJX Cos, Inc. (TJX), has rebounded this week after successfully retesting key moving average support. Given the strong volume profile and long-term uptrend on the weekly chart, this could be just the beginning of a new uptrend phase. On the daily chart, we can see the significance of the August breakout. The move above $135 surpassed the highest since May and was punctuated by a wide gap the day after the quarterly earnings report. TJX closed lower on its gap day, suggesting a lack of purchasing power after earnings. However, the stock resumed its long-term uptrend into October after returning to breakout levels. Most recently, there was a pullback to the 50-day moving average earlier this month, shortly after which a new wave of buyers pushed prices to a 52-week high this week. The RSI remains above the key level of 40 during a test of the 50-day moving average, indicating strong overall momentum for this apparel retailer. If we zoom in on the past 12 months, we can see that the volume characteristics are very good. The accumulation and distribution line has been trending steadily upward since June, confirming that volume is supporting the overall cyclical upward trend in prices. Chaikin Money Flow (CMF) is still safely above the zero level, indicating that TJX is still in an accumulation period, which could further support further price appreciation. The real magic of a stock like TJX is its long-term uptrend as shown on the weekly chart. After hitting a significant low in May 2022, this retail name has seen steady and sustained progress. All of the rallies have found support around the 40-week moving average, with each small pullback leading to further gains. Price momentum remains strong, with the weekly RSI not falling below 40 since the May 2022 low. From a risk management perspective, regular testing of the 200-day moving average helped identify potential support during this extended secular uptrend phase. If TJX falls below the 50-day moving average in the coming weeks, we would consider the 200-day moving average a great opportunity to revisit this long-term winner. —David Keller, CMT Marketmisbehavior.com Disclosure: None. All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliate companies, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The Content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
