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Black Friday Looms: Retail Stock Charts Look Like Smelly Crap



November 20, 2012 – Comments (0)

As Black Friday looms, investors are taking a closer look at the retail stocks in hopes of finding the next gem. Today, the markets are trading flat which was widely expected after the monster rally yesterday. While things seem quiet, there is some major action in the retail sector.

Best Buy Co., Inc. (NYSE:BBY) is taking a beating after swinging to a third quarter loss on charges. The stock is trading at $12.14 -1.61 (-11.71%) and is hitting a new 52 week low. This retailer would not be one to mess with in the near term into Black Friday unless a bottoming tail is seen on the chart. It is cheap, but no reversal signal has been seen.

Before we get into a few other retailers, let's look at how the retail ETF is holding up.  Merrill Lynch Retail HOLDRS ETF (NYSEARCA:RTH). The chart of the RTH has fallen off the 52 week highs. Last Friday, it kissed the 200 moving average which was major support. Since then, it has experienced a solid bounce back to the 50 and the 20 moving averages. Unless it regains the 20 and 50 moving average on a closing basis, the ETF is at resistance. It is wise to handle the RTH with care and keep a neutral on it based on these factors.

Looking at Tiffany & Co. (NYSE:TIF), American Eagle Outfitters(NYSE:AEO), Bed Bath & Beyond Inc. (NASDAQ:BBBY) I find myself without anything positive to say about the charts. This tells me the holiday season may be dissapointing in a major way. This almost makes perfect sense based on the Fiscal Cliff issue facing the entire market and economy. Think about it this way, if Americans do not know if their taxes will be going up next year, if the economy could spin into a new recession or worse due to the Fiscal Cliff, they are unlikely to spend. Therefore, the fact that retail stocks look horrible make perfect sense.

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Gareth Soloway

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