Department store concern Kohl's Corporation (NYSE:KSS) have been on a slow rebound since a post-earnings bear gap in mid-November and subsequent bottoming out at eight-month lows on Dec. 21. The stock has managed to tack on 5.7% year-to-date, and even reclaim the aforementioned bear gap earlier this month. However, in the wake of its rally, the equity ran up to a historically bearish trendline, that could send the stock back down the charts.
Drilling down, KSS just came within one standard deviation of its 200-day moving average -- a trendline that has served as a ceiling for the stock since its bear gap. This signal has flashed on the charts four other times in the past three years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. The stock has been lower one month later each time, averaging a 4.1% drop. From where it currently sits at $69.86, a similar move would kick the stock down to $67 -- right below the $68 level, which has acted as an area of support in recent months.
Analysts are mixed on the stock, with six "strong buy" ratings, seven "hold" ratings, and one "strong sell," leaving the door wide open for a round of downgrades. What's more, the consensus 12-month target price of $76.31 represents a 8.7% premium to current levels, and stands in an area not seen since mid-November.
Short sellers are already piling on KSS, with short interest up 13.7% in the last two reporting periods, representing a healthy 16.4% of the stock's available float, or roughly 8 days of trading at the equity's average daily volume. Echoing this pessimistic mentality, it looks like puts are being bought to open at a quicker clip than usual on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The equity currently sports a 50-day put/call volume ratio that sits in the 84th percentile of its annual range.
For traders who want to speculate on Kohls next leg down with options, the security's Schaeffer's Volatility Index (SVI) of 30% stands higher than just 8% of all other readings for the past year. This means that near-term options are pricing in relatively low volatility expectations right now.