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Tickers in this Article: ERTS, ATVI, MAT, HAS, LF, JAKK
There were a lot of fears related to how consumer spending would fare during the 2009 holiday season. But regardless of the actual money spent by consumers during the holidays, many retailer stocks held up very well. Toys represented a particular area of concern as spending for this group usually comes from parents and not the teen to young adult group, which tends to spend through all types of environments. However, toy stocks have proved to be resilient, even outperforming some video games stocks like Electronic Arts Inc. (Nasdaq:ERTS) and Activision Blizzard, Inc. (Nasdaq:ATVI).

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Mattel, Inc. (Nasdaq:MAT) for instance, is trading at new 52-week highs. It recently cleared a four-month consolidation and then followed through, distancing itself from the base. MAT weathered the recent weakness in the general markets very well and has been able to stay above its 50-day moving average. While MAT is a little extended, it hasn't given up much of its recent gains, and is showing strong support from buyers. The $20.50-$21 level is an area to watch for support if MAT suddenly encountered weakness.

Source: StockCharts.com

Hasbro, Inc. (NYSE:HAS) is another toy stock that is trading at a fresh 52-week high. HAS actually cleared its base heading into the holiday season, and held above that base despite the pullback early in 2010. The pullback merely served as a test of the breakout and HAS cleared the post breakout consolidation on a surge in volume in February. It is currently flagging and showing strong support from buyers.

Source: StockCharts.com

LeapFrog Enterprises Inc. (NYSE:LF) is another interesting example of a toy stock. LF competes with the video game sector in certain ways, providing technology-based educational platforms. Many have expected for LF to struggle with competition coming from so many different venues and it has been in a steady decline after a brief period of outperformance following its IPO in 2002. However, LF is trading at 52-week highs after clearing a lengthy consolidation on a surge in volume. In the near term, LF is a picture of strength - the question is whether LF can sustain this strength and leave the recent base as an important bottom.

Source: StockCharts.com

Despite the strong performance from the sector, JAKKS Pacific, Inc. (Nasdaq:JAKK) is an example of a stock that has struggled recently. JAKK had a sharp correction heading into the holidays and has been attempting to stabilize since then. It has been unable to reclaim much of the initial decline, although the recent price action is somewhat positive. JAKK has been forming a base in the $11-$13 range and is close to testing the upper range of this base. The consolidation is taking the shape of a double bottom; if JAKK clears resistance near $12.80 this would hint at an eventual test of October highs. The $10.80 level is the other level to watch, as a break below this area would imply all sorts of problems for the stock. (For more, check out Analyzing Chart Patterns.)

Source: StockCharts.com

Bottom Line
This is certainly a case where the charts are revealing price action that may be contrary to your beliefs. I would have never expected to see strength in this sector through a recession, much less the hype surrounding this economic downturn and the references to a second Great Depression. As traders, we often get locked into a certain mindset, but it is important to remain objective and pay attention to what clues the markets are revealing. There could be a million reasons why the toy stocks are trading well, and it's more important to realize this than it is to try and dissect why it should or shouldn't be acting this well. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

The author does not hold a position in any of the companies mentioned above.

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