With Black Friday and the holiday shopping season quickly approaching, companies from segments such as apparel, department stores, computer and electronics, general merchandise, and related subsectors will likely be the focus of many active traders. The performance of this broad group is often looked to as a barometer of consumer sentiment, confidence, and overall economic health. In this article, we'll take a look at several charts to see how the sector is performing and how active traders will likely position themselves over the weeks and months ahead.
SPDR S&P Retail ETF (XRT)
Active traders often turn to exchange-traded products such as the SPDR Retail ETF (XRT) to get a sense of where a certain market segment could be headed. As you can see from the chart below, the $43 mark has proven to be an influential level of support and resistance for most of 2019. Now that the price has risen above the horizontal trendline, traders will likely shift their bias to the upside and use the recent retracement toward the new-found support as a buying opportunity.
From a risk management perspective, followers of technical analysis will likely look to protect their long positions by placing stop-loss orders below the nearby support of the 200-day moving average, which is currently trading near $42.79. Traders will also look to the recent crossover between the 50-day and 200-day moving averages (shown by the blue circle) as confirmation of a long-term move higher. This bullish crossover between two major moving averages is also known as a golden cross and is commonly used by active traders to mark the beginning of a prolonged uptrend.
Hibbett Sports, Inc. (HIBB)
With a weighting of 1.83% of the XRT ETF, Hibbett Sports, Inc. (HIBB) represents the fund's top holding. With a market capitalization of just over $450 million, this specialty retailer looks to have lots of room to move higher.
Taking a look at the chart, you can see that the move higher over the past couple of months has pushed the price above a key level of resistance as shown by the dotted trendline. The breakout has triggered a bullish crossover between the long-term moving averages, which could suggest that the stock is in the early stages of a major uptrend. Depending on risk tolerance and investment horizon, traders will likely look to place stop-loss orders below either the 50-day or 200-day moving average ($23.04 and $20.23 respectively).
Sally Beauty Holdings Inc. (SBH)
Another retail stock that is gaining traction with active traders as of late is Sally Beauty Holdings Inc. (SBH). As you can see from the chart below, the recent gap higher, a result of positive earnings, has resulted in bullish crossover between the 50-day and 200-day moving averages.
As discussed above, this pattern suggests that the long-term uptrend could just be getting underway. Active traders may use the recent retracement as a buying opportunity since it makes the risk/reward of a trade more lucrative.
The Bottom Line
As the holiday shopping season approaches, active traders are readying their portfolios to take advantage of a major move higher. More specifically, as we discussed on the charts above, bullish crossovers between major moving averages are suggesting that we could be in the early stages of a prolonged uptrend.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.