The reports on U.S. holiday shopping are coming fast and furious. The early tally looks quite bullish, and retail stocks responded. The SPDR S&P Retail ETF (XRT) jumped 1.1% today to a new high for the year. Surprisingly, trading volume of 3.7M shares remained well below the 90-day moving average of 5.0M.
Source: FreeStockCharts.com
Reuters reported results from Mastercard (MA) indicating consumers spent a record $800B this holiday season.
“The report said holiday sales in stores and online between Nov 1 and Dec 24 rose 4.9 percent, the fastest year-on-year pace of increase since 2011. Mastercard, which tracks spending by combining sales activity in its payments network with estimates of cash and other payment forms, excluded automobile sales from its figures.”
These numbers validate XRT’s rally going into Christmas. I am relieved I went ahead and started accumulating call options on the post-Thanksgiving breakout confirmation that forced my hand. However, there were no subsequent dips to allow me to grow a larger position at lower prices. I ended up locking in profits well ahead of schedule and sold the call options last week. Note that XRT is now retracing a major one-day sell-off ahead of Christmas 2016. The latest breakout for XRT has me wondering whether the ETF will dip much at all in the coming few months as was my hope to setup what I still think will be a key trading and investing play for 2018. Needless to say, I am keeping a firm grip on the shares I still own of various individual retailers.
Individual Retailers
O’Reilly Automotive (ORLY) was one of the retailers I closed out to lock in profits. Now, along with Autozone (AZO), a potential turning point is already developing in the form of a Bollinger Band (BB) squeeze. As a refresher, a BB squeeze occurs as volatility implodes on a stock at the end of a period of consolidation. In most of the charts I post, the BBs are represented by the two-toned grey areas that bound most of the price action in a stock. A breakout or breakdown from a BB squeeze typically sustains itself for quite some time. If this pattern resolves into a breakdown, I will be looking to buy a test of support at the converging 50 and 200-day moving averages (DMAs). If the pattern resolves into a breakout, I will probably stay on the sidelines despite the endorsement these stocks recently received; I think the recovery cycle is a bit mature at this juncture and do not want to chase these particular stocks higher.
Source: FreeStockCharts.com
I DID open one new position: Bed Bath & Beyond Inc. (BBBY). In early December, I offered up BBBY as a very cheap and undervalued retail play. Yet, I wanted to wait for the buyers to prove their interest. Instead, buyers waited to show more interest until after the stock sold off heavily post-earnings last week. Buyers successfully defended 50DMA support. I decided not to wait for more confirmation and loaded up my first tranche of shares.
Source: FreeStockCharts.com
For a quick review of the seasonality in XRT, see “Retailer Seasonality: 2017 Is A Different Year.”
Full disclosure: no positions
Doctor: I agree on RETL, one of my favorite turn-aroundns for 2018. Just shorted BBBY, Bed Bath and Beyond, however.
Other 2018 favorites: TAN, VALE, ANF, Abercrombie and Fitch, GRPN, EVEP, NOG.
Happy holidays.
MJC
Hopefully you get me some BBBY at a cheaper price then. 😉
I have been eyeing GRPN for a while and have yet to pull the trigger. VALE sticks out in your list to me because iron ore has suddenly been ripping higher these days.
Good luck and Happy Holidays!