Tickers in this Article: TJX, JCP, BONT, M
After a sharp three-week bounce, the markets are now overbought and looking a little tired. However, beneath the surface, there are many sectors performing very well. Oil service stocks have been following their parent commodity's lead and the miners are also looking very strong. While these and other inflation related names have been in the forefront, another sector has been quietly setting up.

With rising gas and food prices dominating the headlines, several department store stocks have been developing some interesting patterns in the background. Strength in stocks predicated on consumer spending seems counter intuitive, but these stocks are certainly showing some positive signs. TJX Companies (NYSE:TJX ) for instance, is close to clearing a recent consolidation after a strong start to the year. The $51 level has marked the top of the recent range, but if TJX can clear this area, it will be in the uncharted territory of new all-time highs.


Source: StockCharts.com


J.C. Penney Company (NYSE:JCP) is still well off its all-time highs, but the recent trading action has been very positive. JCP cleared a base in early February and has settled into a second, tighter consolidation just above the prior base. The $37.50 level has been acting as resistance all the way back to 2009, so a breakout may not be easy. However, a close above this level could send it flying higher. (For more, see 5 Strong Stocks Poised For A Breakout.)


Source: StockCharts.com


Bon-Ton Stores (Nasdaq:BONT) is another department store stock that has settled into a base-on-base consolidation much like JCP. There are some negative signs to watch out for, such as the high volume reversal on the March breakout attempt, but overall, BONT remains in a positive price pattern. Traders should keep a close eye on the $17 level for a breakout, as well as the $14 level for support on near-term weakness.


Source: StockCharts.com


Macy's (NYSE:M) is not quite as far along in the process as the other department store stocks, but there are things to like on this chart as well. Macy's has clearly proved that buyers are waiting near the $22 level, and this area is marking the bottom of the current base. Macy's also recently cleared a trendline that was marking the top of a recent trading range signaling a possible move to the top of the base near $26. While it may take some time for this pattern to fully develop, it does appear that the stock is being accumulated and could be headed higher eventually.


Source: StockCharts.com


The Bottom Line
Maybe these stocks will get derailed by rising inflation, but their price action seems to be signaling that market participants are brushing this fear aside. The American consumer has proved to be far more resilient than expected, a pattern that is also revealing itself in restaurant stocks. It is important for a trader to pay close attention to the price action in stocks, as the real catalyst is often unknown until much later in a trend. So far, consumers are not staying away from the department stores and maybe traders shouldn't either.

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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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