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3 Charts From the Retail Sector Amid Inflation Fears

Starbucks, Ulta Beauty, TJX and more have been dominating over the past few months. Let's look at the charts to see the updated trade.

Three main concerns have echoed throughout this bear market: inflation, interest-rate hikes and a recession.

With inflation pinching discretionary spending, higher rates making borrowing more expensive and a potential recession looming in the distance, you'd think that retail stocks would be getting thrashed.

But we’re seeing the exact opposite play out right now -- at least for some companies.

Across the space, there have been some great setups, including: Ulta Beauty  (ULTA) - Get Free Report, TJX  (TJX) - Get Free Report, Nike  (NKE) - Get Free Report, Starbucks  (SBUX) - Get Free Report, Abercrombie & Fitch  (ANF) - Get Free Report and Burlington Stores  (BURL) - Get Free Report, among others.

Let’s look at a few of these stocks to see what may be next.

Trading Ulta Beauty Stock

Daily chart of Ulta stock.

Daily chart of Ulta stock.

Ulta Beauty is fresh off all-time highs and continues to trend higher, which is a big reason I decided to lead with the beauty-products retailer.

The shares are trading right into the $500 level and the 161.8% extension we laid out last month when we said, “Here's How Ulta Beauty Stock Could Reach $500.

They're there now and the stock may take a much-needed break. 

The bulls now would love to see it reset back into the $480 to $485 zone. There, we have prior resistance and current support. With any luck, the 21-day moving average will also be in play near that area.

If the 10-day is support instead, look for another possible rally back to $500, then a potential rally up to the $512 to $515 zone.

Trading TJX Stock

Daily chart of TJX stock.

Daily chart of TJX stock.

TJX stock has looked a bit tired lately. That’s as the shares struggled to rally off current levels. But we opted to look at this one as it recently pushed to all-time highs.

Not many stocks — let alone retail stocks — can make that claim right now.

For TJX, the setup is pretty simple. Ideally, it would have held the $81 area and 10-day moving average. But as it starts to crack lower, bulls will want to see that the stock holds the $78 to $80 area.

This $2 range has recent support and prior resistance, as well as the 21-day and 50-day moving averages. On the upside, $83.75 and $88 stand out as potential upside targets.

Trading Starbucks Stock

Daily chart of Starbucks stock.

Daily chart of Starbucks stock.

I really went between Starbucks and Nike here for this last slot, but chose the coffee-bar chain as it has not broken to new lows since May and continues to power higher.

In fact, Starbucks hit new 52-week highs on Tuesday.

The shares are now pulling back into what should be active support. That’s as Starbucks tests its rising 10-day moving average and prior resistance near $105.

What do I like about this setup? If support fails, traders will know rather quickly and it opens the door back down to $100.

Near this level, buyers find the 50% retracement, 50-day, 21-day and 10-week moving averages and the gap-fill.

On the upside, I’m looking for a potential push to the $111 to $112 area, then the $117 to $117.50, which was major resistance in the fourth quarter of 2021.