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Sears Holdings Corporation (NYSE:SHLD) is soaring and has climbed nearly 30% in the last 4-trading sessions on the heels of insider purchases that have generated a potential short squeeze in the stock. Momentum is strong and the stock is breaking out above trend line resistance, which has it poised to test higher levels.
Insider Buying
On April 15 and 16 of 2014, Director Thomas J. Tisch acquired 475,000 shares of this department stores chain, paying $33.56 per share for a total amount of $15,940,000. Mr. Tisch increased his stake by 325.74% to 620,824 shares with this purchase.
This purchase has been treated with a lot of enthusiasm with investors bidding the stock up nearly 30% in the past 4-trading session. The stock surged 14% on more than twice the daily volume, when the insider trades were reported. With nearly 60% of the float short, there is the potential for a further short squeeze.
Daily Chart
Momentum on SHLD Stock
Momentum on SHLD has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The MACD index moved from positive to negative territory which confirms the MACD crossover buy signal.
The 5-day moving average has crossed above the 20-day moving average. When this occurs, a short term up trend is considered in place.
The RSI (relative strength index) which is an oscillator that measures overbought and oversold levels, is printing a reading near 67, which is slightly below the overbought trigger level of 70. This would signal that the price of the stock could still climb higher from Wednesday’s closing level.
Support and Resistance for SHLD Stock
SHLD stock broke out above trend line resistance near $42 dollar per share, after closing above a downward sloping trend line that connects the highs made in November of 2013 and the highs made in early April 2014.
The next level of target resistance for the SHLD is seen near the highs made in November 2013 at $54.70.
Short-term support is seen near the breakout level at $42. Additional support is seen at the 20-day moving average near $37.60 per share.
Weekly Chart
The weekly chart of SHLD shows that the stock is trading in a large range that is capped by resistance near $54.70. The floor is seen near $27 per share. Momentum on the weekly chart is strong as the MACD is printing in positive territory with an upward sloping trajectory.
Trading SHLD Stock
Investors looking to take advantage of the upward momentum in SHLD could purchase the stock near the breakout level of $42.5 per share. I recommend using the 5-day moving average, near $39.11, as a level to place at stop.
Investors could consider taking profits near $54.50, which coincides with the November 2013 high. That would translate into a profit of 28%. Longer-term investor could consider placing a stop near the 20-week moving average at $35, and placing a take profit near the 2012 highs at $62.
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