It's just one month until the early start of the 2009 holiday sales season. The sector is alive and well as we near this important date, with a number of well-known storefronts pressing up to multi-month highs. But uneven progress through the group demands
and good timing in order to book profits.
A few years ago, seasonal ads didn't hit the airwaves until Thanksgiving, but the date has since been moved to early November by marketing departments in an attempt to increase floor traffic during this critical time of year. Unfortunately, the time shift has yielded negative consequences, because consumers have become resistant to the early advertising barrage, and they understand how it works to their benefit.
Apart from the Black Friday period just after Turkey Day, holiday buyers have refused to pay full price, forcing discounting across the board by early to mid-December. This defensive practice has lowered sales margins, while it cuts into January and February demand. As a result, many retailers now fail to meet revenue expectations and wind up selling off as soon as actual cash register receipts are released after the holiday.
However, the speculative run-up should still be quite vigorous this year, despite paranoia about a penny-pinching consumer. We've seen evidence of this speculative fervor in the last two sessions, with a few retailers taking off and posting double-digit percentage gains. For example,
has risen more than 3 points this week and is now challenging its rally high near $33. That price level also marks a 52-week high.
The stock needs just 4 more points to make a full recovery from the 2008 crash. That's a great accomplishment, especially considering the adverse credit and consumer environment. It also illustrates one quirk of the post-apocalyptic economy: In a nutshell, upper-scale retailers are performing far better these days than mainline or discount retailers.
Despite the economic downturn, the rich are still rich, and they are spending at a healthier pace than their less-fortunate brethren who are dealing with unemployment, late mortgages and the credit crunch. That's why a stock like Nordstrom can zoom toward a full recovery while
is stuck in the mud, just a few points from a multi-year low.
This dichotomy predicts the best holiday season opportunities will come from storefronts that cater to more affluent consumers. These include jewelers, special clothiers and trendy boutiques. In that regard, I hit my database and pulled up three retail favorites that could outperform between now and January's cold reality check.
dropped like a rock in 2008, hitting a nine-year low at $16.75 in November. It bounced at that price level and rolled over a few months later, testing the low in March. Support held, triggering a double-bottom reversal that's yielded a strong recovery in the last seven months. The stock is now trading at a 52-week high.
Accumulation is strong and steady, with the jeweler breaking out of a six-week trading range in Tuesday's session. The blue rising highs trend line points to resistance that should slow progress or trigger a counterswing. If that happens, a pullback to the gap between $38.50 and $39 should offer a great entry.
bottomed out at $4.35 last November and entered a steady recovery that reached the 200-day moving average in April. The recovery stalled out at that level, giving way to a five-month sideways pattern. The stock rallied above that trading range in August and has now pulled to a 52-week high.
Selling pressure intensified about six weeks ago, when the stock approached "round number" resistance at $20. It's been working its way through this persistent barrier, slowly but surely, and has now moved into a position where upside momentum can finally take over and lift price into the upper $20s.
lost more than 90% of its value in a six-month period, finally bottoming out at $2.41 in March. It's been on the recovery trail since that time, lifting above the 200-day moving average in July and grinding higher in a steady uptrend. It posted an 11-month high at $17.50 in mid-September and started to pull back.
The stock dropped into support at the 50-day moving average on Friday and has bounced in the last two sessions in an uptick that could mark the first step of a solid recovery. Accumulation has remained strong through the pullback, indicating the uptrend is still intact and ready to yield even higher prices.
Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.
At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.
Alan Farley is a private trader and publisher of
Hard Right Edge
, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of
, a premium product that outlines his charts and analysis. Farley has also been featured in
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.
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