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Consumer confidence has Kohls finding a bid

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Today's stronger than expected Michigan Consumer Sentiment reading of 95 finds the broader market averages trading higher with gains found in various sectors as depicted by the Oil Service Index (OSX.X) +3.4%, Banking (BIX.X) +2.2%, Semiconductor (SOX.X) +2% and Retail (RLX.X) +1.15%.

Marginal sector weakness is found in the GSTI Software Index (GSO.X) 166 -0.94% on the heels of last night's lackluster earnings and forward outlook from Oracle (NASDAQ:ORCL) $12.87 - 4.3%.

Weakness continues to plague the telecom-related area as the Fiber Optic Index (FOP.X) 92.51 -1% leads sector decliners.

Today is triple-witching and we'd expect that some stock specific action may well be related to option expiration, where a stock may gravitate toward a price level base on certain unwinding or pegging of levels based on various large open interest levels. This can make it tough to really make any type of meaningful market "predictions" as to what type of reaction we're really getting from the MARKET as it relates to today's economic data.

There were not any downside surprises in the data and with consumer confidence rather strong, some of our recent observations in the retailing sector are beginning to make sense. On Wednesday, we noted that the Retail Index (RLX.X) held up very well considering the weaker-than-expected retails sales numbers, and thought that maybe "smart money" was betting on today's consumer confidence numbers. That looks to be the case and the Retail Index (RLX.X) is breaking to a new 52-week high today and looks ready to challenge the all-time highs found in April 2000 of 1,022 (currently trading 969).

One stock on a bulls list is shares of Kohls (NYSE:KSS) $71.10 +1.6% as this stock has been one of the stronger stocks in the sector. The bullish vertical count is $85 from the point and figure chart. Here's what I'm going to do with my bar chart to try and outline some levels for traders to be watching the next couple of months.

Kohl's Corporation Chart - Daily Interval

It's interesting sometimes to look at the vertical counts (bullish and bearish) then slap a retracement bracket on the bar chart to look for levels. When we do this on Kohl's (KSS) chart, it sure makes one wonder doesn't it? If the stock can break it's old all-time high of $71.85, then the $77.04 level from retracement could be the near-term target. With MACD just starting to trend higher, this stock sure looks bullish to me.

I even like Kohls (KSS) for a retirement account where an options trader could buy the underlying stock, then write some covered calls from time to time to work down their cost basis.

Jeff Bailey
Senior Market Technician
Option Investor

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