Are Sears Holdings Shares headed for a Correction?
Sears Holdings Corporation (NASDAQ:SHLD) shares hit a 'Head-and-Shoulders Pattern' today and if technical investing tells us anything, it would warrant caution to those holding SHLD shares.
Not everyone believes in charts and let's be honest, these days you have to consider all the data and information before making a decision on buying or selling a given security. Still, a picture is worth a thousand words and Sears Holdings shares as of today fit a perfect 'head and shoulders' pattern. So what does that mean exactly and why should you care?
According to Investopedia.com, a Head And Shoulders Pattern is a technical analysis term used to describe a chart formation in which a stock's price:
1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.
The first and third peaks are shoulders, and the second peak forms the head.
The "head-and-shoulders" pattern is believed to be one of the most reliable trend-reversal patterns.
See the current Sears Holdings chart to the right and an example of what becomes of a 'head-and-shoulders' pattern below:
Another good example and study of 'head and shoulders' patterns can be found at trade10.com - click to read. Sears Holdings short percentage of their float is currently at 15% and a typical day sees around 1.46 million shares traded on the Nasdaq.
The slowdown in spite of an improving economy is the biggest concern for Sears Holdings shareholders, the problem being as consumers continue to feel the pressure of housing and employment concerns they have less money to spend at Sears and other retailers.
The projected end of the recession may signal an increase in gross domestic product, but problems with housing and employment could continue to weigh on consumers’ wallets. As a result, many analysts believe that a recovery in consumer spending will be slow and uneven, and it could take several years for consumers to restore their sense of financial security to pre-recession levels.
Time will tell if Sears shares are due for a decline and if they prove the 'head-and-shoulders' pattern correct, care to place a bet?
Disclaimer: No positions in any of the securities mentioned in this publication.