The Easy-to-Miss TJX Companies Inc (TJX) Buy Signal

The Nasdaq's weekly win streak suggests TJX Companies Inc (TJX) could resume its quest for fresh highs

by Alex Eppstein

Published on Aug 16, 2016 at 11:12 AM

Discount retailer TJX Companies Inc (NYSE:TJX) is suffering a rare slump, after hitting a record high of $83.64 yesterday. To blame for the stock's 3.1% loss are disappointing current-quarter and fiscal 2017 profit forecasts -- though the company's second-quarter earnings and sales came in above estimates. However, one broad-market signal suggests TJX could soon resume its longer-term uptrend.

Specifically, the Nasdaq completed its seventh straight weekly win last Friday. Historically speaking, TJX has been one of the best stocks to own after this signal flashes. Out of 12 returns, the shares have been positive 10 times going four weeks out. Plus, on average, the stock gains an astounding 7.1% during that time frame.

Wall Street seemingly expects history to repeat itself, based on the extreme levels of optimism we're seeing. For starters, during the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 3.32 TJX calls for every put -- a ratio that ranks in the high 82nd annual percentile. Moreover, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.44 checks in below 78% of all other readings taken in the past year, echoing the call-skew (particularly among short-term strikes).

In the last two weeks, the near-the-money August 82.50 call has been the most popular strike, based on open interest added. By the numbers, open interest increased by nearly 7,200 contracts, and data from the major exchanges confirms considerable buy-to-open activity at the strike.

If that's not enough, 13 of 17 analysts rate TJX a "buy" or better, with not a single "sell" recommendation to be found. And short sellers have been turning tail. During the latest reporting period, short interest plummeted 15.6%, leaving just 1.2% of the stock's float dedicated to short interest.

As alluded to, TJX Companies Inc (NYSE:TJX) has been a technical marvel, last seen at $80.23. Since the start of the year, the retail stock has popped over 13%, and even today's retreat seems to have found a foothold at the ascending 30-day moving average.

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