Credit: Shutterstock photoEvery week, Marc Chaikin applies his groundbreaking analysis to an ETF or a sector. Today, he looks at the SPDR S&P Retail ETF (XRT).
As indicated by the Chaikin Power Bar rankings (see below) of the 20 SPDR S&P Sub Sector ETFs, the Retail ETF (XRT) continues to show a very positive differential between bullish and bearish Chaikin Power Gauge stock ratings. 32 stocks in the XRT have a bullish Power Gauge stock rating vs. only 14 with a bearish rating. Because of the renewed interest in Retail stocks, the XRT is now ranked 4 out of 20 SPDR Subsector Industry Groups in terms of 3-6 month potential.
The current pullback in the broad market has seen many stocks in the XRT diverge from the market and move higher while the energy stocks have led the broader market averages lower, led by Bed Bath and Beyond (BBBY) and DSW Inc. (DSW), these strong big box retailers suggest a buying opportunity in the XRT, which has been outperforming the market since mid-October. The recent move toward the previous peak in the XRT and the subsequent pullback with the market give investors an attractive entry point in the XRT and the strongest retailers in the group.
With the XRT now oversold on a short-term basis, we look for large cap retail stocks that have performed relatively stronger than the market on these volatile reversal days with weak closes. These relative leaders should be in the forefront of the market when and if the market bounces off support in the 1,950 area and reverses back above 2,000 on the S&P 500 Index.
The plunging price of crude oil, which has translated to lower gasoline prices for consumers at the pump, is akin to a $100 billion tax cut for the American consumer. This has had a positive effect on retail sales already as indicated by better than expected retail sales in November. There also is a trend in the stock market toward companies likes DSW Inc, Dick’s Sporting Goods (DKS), Bed Bath and Beyond, and Macy’s (M) that have developed strong online e-commerce engines. This better positions them to compete with Amazon (AMZN) in the retail space.
Use any short-term dips to buy the XRT in anticipation of renewed strength in this strong sector in the weeks ahead.
The SPDR S&P Retail ETF (XRT) has 32 Bullish-rated Chaikin Power Gauge stocks vs. 14 with Bearish ratings, as indicated by the Chaikin Power Bar for the XRT below. This indicates positive potential for the XRT over the next 3 – 6 months. When combined with strong relative strength to the market, this is a powerful one-two punch for investors.
The Chaikin Portfolio Health Check is an excellent tool to help zero in on the strongest stocks in any ETF; in the XRT there are 32 bullish-rated stocks.
By looking at the individual component stocks through the lens of the 20 factor Chaikin Power Gauge stock rating model in Chaikin Analytics, you can easily find the stocks in the XRT ETF with the strongest price potential over the next 3-6 months. These are stocks to buy, as they are likely to outperform the XRT, as well as the overall market.
The Chaikin Power Grid in Portfolio Health Check (see below) maps stocks and industry groups from strong to weak so you can easily determine the best and worst stocks in any ETF. To find the strongest stocks in the XRT, we look to the upper right quadrant of the Power Grid (strong Power Gauge stocks in strong industry groups) where we find stocks with the best potential for price gains over the next 3-6 months. There we see stocks like Brown Shoe (BWS), Best Buy (BBY), CVS (CVS) and PetSmart (PETM), which has recently received a P/E takeover bid.
Stocks in the upper left quadrant (weak Power Gauge-rated stocks in strong Industry Groups) like Amazon and Netflix (NFLX) can be swapped for strong stocks in those same industry groups like eBay (EBAY) and DSW Inc.
Over time, strong stocks in strong industry groups will outperform the market.
In addition to buying the XRT on weakness, one stock to buy in the XRT is DSW Inc.
DSW Inc. has a bullish Power Gauge rating that is driven by increasing bullish analyst’s opinions, positive Industry Group strength and improving price volume activity. As a bricks and mortar retailer that has turned around its business and created a strong online presence, DSW represents an alternative to the weak price and profit performance of Amazon. A swap out of AMZN into DSW makes sense at these levels.
Plus:
Chaikin Analytics stock research
Chaikin Portfolio Health Check, in Chaikin Power Suite
NASDAQ Chaikin Power Stock Indexes
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
