This column was originally published on RealMoney on Feb. 14 at 12:00 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
The retail industry didn't get any presents this holiday season. High oil prices, news jitters and general malaise contributed to universal tightfistedness at shopping malls in December. And those endless holiday ads didn't help matters.
Holiday commercials hit the airwaves just after Halloween, long before their normal start over the Thanksgiving weekend. This stupid decision numbed and turned off consumers.
The sector is now in a time of year when individual components perform according to their own story line, instead of getting tossed around by broad industry concerns. This period will last into the summer months, when holiday speculation will kick into gear once again.
How do you find retailers with the most intriguing stories? You could start by asking your teenagers what's hot and what's not at the shopping malls.
Four names keep popping to the top of my retail leadership list:
Tweeter Home Entertainment
. But these aren't necessarily the stocks with the most upside in the weeks ahead.
Each of these group leaders has enjoyed a substantial rally in the last few months and may be overextended. I'd rather look for opportunities in stocks that are completing bullish bases or pulling back to support after strong breakouts.
With that in mind, let's highlight five retailers that should attract strong interest as we move toward the second quarter.
has been on a roll since completing its acquisition of Electronic Boutique last year. The stock broke out of a six-month basing pattern in January and rallied to an all-time high. It's been pulling back for the last week and could reach its 50-day moving average of $37.60. This would be a low-risk entry point.
You have to be impressed with this company's results, given the problems with
lame Xbox 360 rollout. Game creators reported huge shortfalls last quarter because the console wasn't available in large quantities for the holidays. In their wisdom, Redmond's finest have created a huge opening for the PlayStation 3, which is coming to a store near you later this year.
Auto-parts stores are perking up after many months of sideways price action -- a majority of these Main Street issues show very bullish patterns.
, my favorite play in the group, has just broken out of a five-month cup-and-handle pattern.
Note the considerable overlap in prices before Monday's solid breakout. This is typical behavior for strong stocks when the broad market is weak or selling off. It suggests the stock will push considerably higher as the major averages stabilize.
It's no surprise that
is presenting another good trading opportunity. The stock has been in a major uptrend for the last nine years. It hit a new high at $46.32 in November and started to pull back. Price found support at the 50-day moving average and started to move sideways in a bowl pattern.
The recovery has now reached three-month resistance in the mid-$40s. Expect another pullback, followed by a strong run over the November high. That could start a subsequent rally up and over $50. This stock often moves with monthly same-store sales data, so the first week of March could set it into motion.
had a bad year in 2005. The stock got cut in half between July and October after reporting very weak sales. But it's been on the recovery trail since then and has outperformed the sector the last few months. The stock shows an ascending triangle pattern near the upper third of its prior decline.
A breakout here could trigger a fast and lucrative rally to 2005 resistance near $35. Note that this stock is too dangerous to hold as an investment. It's better suited to a carefully timed swing trade up to resistance, where all long positions should be exited.
Barnes & Noble
broke out to an all-time high a year ago and spent the next eight months testing new support. It rallied off that level in October and tagged a new high in mid-December. It's been consolidating its gains for the last two months and looks set to take another run at the highs.
This is a low-momentum, transitional pattern that could be a good choice for patient investors. The long-term chart is bullish, but gains will be booked in dimes and quarters rather than dollar bills. The good news: Upside progress should speed up once the stock moves above the January high of $44.75.
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Alan Farley is a professional trader and author of
The Master Swing Trader
. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback;
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