With Black Friday and the Christmas shopping season rapidly approaching, firms in categories such as clothes, department stores, computer and electronics, general items, and associated subsectors are expected to get the attention of many active traders. This wide group’s performance is often seen as an indicator of consumer mood, confidence, and general economic health. In this post, we’ll look at a few charts to see how the sector is doing and how active traders will likely position themselves in the next weeks and months.
SPDR S&P Retail ETF (XRT)
Active traders often use exchange-traded funds (ETFs) such as the SPDR Retail ETF (XRT) to gauge where a certain market sector may be going. As the chart below shows, the $43 level has been a significant level of support and resistance for the most of 2019. Now that the price has broken over the horizontal trendline, traders will most likely move their focus to the upside, taking advantage of the recent retreat into the newfound support as a buying opportunity.
Technical analysts will most likely attempt to preserve their long holdings by putting stop-loss orders below the close support of the 200-day moving average, which is now trading around $42.79. Traders will also seek for evidence of a long-term move higher in the recent crossing between the 50-day and 200-day moving averages (indicated by the blue circle). This bullish crossing of two major moving averages, also known as a golden cross, is widely utilized by active traders to signal the start of a long-term rally.
Hibbett Sports, Inc. (HIBB)
Hibbett Sports, Inc. (HIBB) is the fund’s largest position, accounting for 1.83% of the XRT ETF’s weighting. With a market value of just more than $450 million, this niche retailer seems to have plenty of potential to grow.
Looking at the chart, you can see that the recent uptrend has pushed the price over a crucial level of resistance, as shown by the dotted trendline. The breakout has resulted in a positive crossing between the long-term moving averages, indicating that the stock is in the early stages of a big rally. Traders would likely attempt to put stop-loss orders below the 50-day or 200-day moving averages ($23.04 and $20.23, respectively) depending on risk tolerance and investment horizon.
Sally Beauty Holdings Inc. (SBH)
Sally Beauty Holdings Inc. is another retail company that has recently gained momentum with active traders (SBH).As the chart below shows, the recent surge higher due to excellent results has resulted in a bullish crossing between the 50-day and 200-day moving averages.
As previously noted, this pattern signals that the long-term upswing may be just getting started. Active traders might take advantage of the recent downturn as a purchasing opportunity since it increases the risk/reward of a transaction.
The Bottom Line
As the Christmas shopping season approaches, professional traders are preparing their portfolios to profit from a significant move upward. More precisely, as seen in the charts above, bullish crosses between significant moving averages indicate that we may be in the early stages of a long-term rally.
Casey Murphy did not hold any of the assets listed at the time of writing.
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