This column was originally published on RealMoney on Nov. 15 at 11:59 a.m. EST. It's being republished as a bonus for TheStreet.com readers.
Monday, I examined the retail sector and its mixed holiday prospects.
Today, let's continue the discussion and identify stocks to trade as we head into the most important time of the year for America's shopping malls.
Expect a stock-picker's market in the sector as we approach year's end, rather than a raging bull market.
It's late in the economic cycle and consumers will need good reasons to open their wallets during the holiday season.
In this type of environment, careful selection should pay off; throwing money at these stocks could be a disaster.
I'd also stick with the group leaders for now.
These stocks have risen to the top for good reasons and should continue to outperform through the holidays.
In other words, you'll do better buying lofty highs than chasing basement bargains.
Here's my watch list of the eight strongest stocks I could find in the group.
Notice how some look ready to enter right now, while others should be watched closely until key price pivots are hit.
is a fairly new issue, having come public in early 2004.
It's been in a steady uptrend since that time.
The stock broke out to its latest high two weeks ago, after a six-week consolidation near $29.
It's now congesting in a tight triangle pattern that may set up strong follow-through into the upper $30s.
printed a major top at $30.64 in 2002. The stock has been approaching this key level in a rising parallel channel for the last three months. Price finally reached up and tagged this old high on Friday. Look for another downdraft here and then a sharp move that carries the stock to a new multiyear high.
Jos. A. Bank Clothiers
shows up on everyone's top 10 list. This isn't a surprise because the stock has been on a tear in 2005, rising more than 60%. The latest leg of its rally stalled in July, when the entire sector sold off. Price stabilized after a correction and is now testing the summer high. Watch for a consolidation at current levels that sets up a major breakout.
stalled out in August after a strong rally. It pulled back sharply and then charged back to the high one month later. That test failed and the stock sold off to the 200-day moving average. Price recovered once again and returned to summer resistance last week. Monday's classic triple-top breakout could start an extended run.
( CLE) gapped through its all-time high earlier this month after reporting strong monthly sales. The stock now is congesting above this key level and could move sharply higher in the weeks ahead. One caution: The company reports earnings on Thursday. Smart traders will stand aside until this major news event passes.
( DBRN) charged above its summer high two weeks ago, reaching $29.37 before starting to pull back. This correction looks like a developing bull flag pattern that eventually will offer a low-risk trade entry. The best plan is to put this issue on your watch list and enter on a rally above the two November highs.
has been grinding higher in a steady uptrend for nine years. My wife attributes this outstanding performance to their quality clothing. In any case, the stock gapped up to a new high last week and pulled back immediately. It could start a strong run into the $50s once it trades over the recent peak at $44.76.
( LDG) rallied through its 1998 high in July and rolled over in a mild correction. It found support at $40 and started a bounce toward resistance several weeks ago. Notice how the stock has set up a basing pattern at the old high. A push over this level should trigger a quick move to the July peak. In turn, this could yield a strong breakout over nine-year resistance.
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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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