Sears Holdings Corp (NASDAQ:SHLD) announced today that they will be working on new strategic business initiatives in order to improve its financial situation while improving its long-term business plans. Their main focus is to shift directions from a regular retail store that holds lots of merchandise to a membership based business model with less inventory and fewer stores.
They are looking to close an additional 150 stores that have been unprofitable to help slow the bleeding and they are looking to sell the Craftsman business for roughly $775 million.
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In addition, they are also looking at using their real estate for access to more cash that they can use to grow the business and fund the transition. These are aggressive moves by the Board of Directors who are looking to shake things up and get out of this downward spiral the company has been in for a while. Sears Holding Corp. has fell behind in the times which has reflected greatly in their share price. Time will tell if these moves will point the company in a better, more lucrative direction as it will provide greater financial flexibility.
Looking at the daily chart above you will notice that Sears Holdings Corp (NASDAQ:SHLD) has been on a strong downtrend dating back to June of 2015 where prices were trading in the $44 range. You’ll see that shares cascaded through the 200-day moving average (yellow line) on heavy volume and has had a hard time finding buyers since then.
Shares are looking like they have bottomed out at the $8 level and have since made a nice bounce back with some decent buying volume, but they are getting ready to run into some major resistance at the $11 level followed up by the $12 level and where the 200-day moving is currently sitting at $13.23. Ideally we would like to see shares reclaim and hold the 200-day moving average to confirm that buyers have taken control of the tape and until they do we have to assume that sellers are in control.
What I really like about this chart is how the 50-day and 200-day moving averages are both starting to flatten out after being in a sharp downward trend for quite a while. This shows that price action is slowing down and consolidating, which could point to a reversal if prices can reclaim the moving averages.
Zooming in on the 5-minute chart you will see that shares were bought up in the pre-market session following the announcement and were able to hold the gap up with an opening print at $10.99 compared to yesterdays close of $10.36, marking a 6% jump in value. Shares remained relatively flat throughout the trading day which is a good sign because generally after a big gap up like this we will see a lot of profit taking from longs that will drive down prices. This could mean that longs think there is greater potential for more upside and is something we will want to watch going forward.