If there has been an industry to avoid in the last couple of months, bricks-and-mortar retail is it.
Case in point: While the S&P 500 is up almost 9% since the start of 2017, the SPDR S&P 500 Retail ETF (XRT) is down 8% over that same stretch of time -- that's some pretty galling under-performance.
Not every retail stock is getting obliterated in this environment, though. In fact, a handful are actually posting incredibly strong performance in spite of the selloffs seen elsewhere in the retail industry. And, specifically, three large retail stocks look ready to rally higher this summer.
So, to figure out which retailers to buy here, we're taking a technical look at three huge retail names that are getting ready to charge higher (and when you should buy them).
Now, without further ado, here's a rundown of three technical setups that are showing bullish trading potential right now.
Office Depot Inc.
Leading things off is Office Depot Inc. (ODP) , the $2.7 billion office-supply retailer that owns the OfficeMax and Office Depot store brands. Shares have been posting positive momentum this year, up more than 15% since the beginning of 2017. But don't worry if you've missed that upside move in Office Depot; a classic continuation pattern in shares is signaling higher ground from here.
Office Depot is currently forming an ascending triangle, a bullish continuation setup that's formed by horizontal resistance up above shares at $5.40, and uptrending support to the downside. Basically, as Office Depot's stock price pinballs in between that pair of technically important price levels, shares have been getting squeezed closer and closer to a breakout through our $5.40 price ceiling. When that happens, we've got our buy signal.
The 50-day moving average has been acting like a strong proxy for support since the beginning of April. From a risk-management standpoint, that means, once Office Depot pushes through our $5.40 breakout level, the 50-day becomes a logical place to park a protective stop.
Burlington Stores Inc.
We're seeing the exact same price action in shares of $7 billion discount-apparel retail chain Burlington Stores Inc. (BURL) . Just like Office Depot, Burlington has been forming an ascending triangle setup for the last few months -- and shares are testing breakout territory in Tuesday's session. For Burlington, the breakout price to watch is resistance up at $102.50.
There's some extra confirmation of Burlington's upside potential coming from relative strength, the indicator down at the bottom of Burlington's price chart. This stock's relative strength line has been holding onto an uptrend of its own since last summer, signaling that Burlington is continuing to outperform the rest of the market in the long term.
As long as that relative strength continues pointing higher, this stock is predisposed to outperform.
Home Depot Inc.
Rounding out our list of bullish retail trades is home-improvement giant Home Depot Inc. (HD) . You don't need to be an expert trader to figure out what's happening in shares of this $184 billion retail chain -- instead, the chart pattern in play here is about as simple as it gets.
Home Depot has been bouncing its way higher in a well-defined uptrend since last fall, rallying about 27% from its November lows. Fast-forward to this summer, and Home Depot is still a "buy the dips stock." In other words, every test of the bottom of Home Depot's trend channel has provided an optimal entry point for buyers on the way up -- and shares are showing off another potential buy signal this month.
This is another stock where the 50-day moving average has been acting like a strong proxy for trend line support. If you decide to buy the next up-day in Home Depot, consider parking a stop on the other side of the 50-day moving average. If shares violate that level, you've got an early warning that the uptrend is over.
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