Retail is back in the spotlight this week, catching attention after Macy's Inc. (M) posted its first sales gain in three years when it reported fourth-quarter earnings.
After rocketing higher out of the gate this morning, Macy's faded into Tuesday afternoon, plunging from double-digit gains to finishing up slightly.
And while that volatile trading session might be front and center on Wall Street right now, the reality is that Macy's earnings-fueled move could be the catalyst for upside in other retail stocks this quarter.
To figure out which retail trades are in play here, we're turning to the charts for a technical look at five that look ready to rip on the heels of Macy's earnings.
Up first is Macy's department store peer J.C. Penney Co. (JCP) . Like Macy's, J.C. Penney started off Tuesday's session in rally-mode, only to fade into the afternoon. But the key difference here is that this stock is showing off a very well-defined, tradeable price pattern right now. And a dip in shares could present investors with a big buy signal.
J.C. Penney has spent the last several months in a textbook uptrending channel, catching a bid on every test of the bottom of its price channel since bottoming in November. Shares are attempting to hold a near-term breakout above the $4.25 level in Tuesday's session, but the more important thing here is the fact that JCP's uptrend is alive and well.
Bullishness in J.C. Penney is confirmed by relative strength, which has been in an uptrend of its own since November. That uptrend in relative strength is our signal that J.C. Penney is systematically outperforming the rest of the market in 2018. Buy the dips.
Kohl's Corp. (KSS) is one of the best-positioned stocks in the retail space right now, and a textbook ascending triangle setup in shares is signaling more upside ahead. The price pattern is formed by horizontal resistance up above shares at $69, with uptrending support to the downside.
Basically, as Kohl's bounces in between those two technical levels, shares have been getting squeezed closer to a breakout. The buy signal comes on a push through that aforementioned $69 price ceiling.
From a technical standpoint, Dollar General (DG) looks a lot like many of its retail peers right now. After correcting early in February, shares are catching a bid at trendline support, signaling the potential for more upside in the near term.
For Dollar General, last week's successful bounce off of trendline support looks like a buy signal for shares. Meanwhile, from a risk management standpoint, it's a wise move to park a protective stop on the other side of the $92.50 level -- if that line in the sand gets crossed, then Dollar General's uptrend is over, and you don't want to own it anymore.
There's more of the same positive trend in Home Depot's (HD) price action right now. Like Dollar General and J.C. Penney, Home Depot is holding onto a well-defined uptrending channel, catching a bid on every test of trendline support since last summer.
The big difference in Home Depot's chart is the fact that this stock has seen more excursions to the upside starting in December. But after getting overextended, shares are back at trendline support for the first time since mid-November, providing a low-risk, high-reward buying opportunity for shares here. HD has seen choppy trading in February, but it's another buy-the-dips-stock as shares catch a bid at support.
Last on the list of retail rallyers is housewares store chain RH (RH) . This stock is showing off a somewhat different technical setup than most of the other names on our list - RH is currently forming a rectangle pattern after rallying hard from August's lows.
The rectangle is a common price setup after large moves; it gives buyers and sellers a chance to cool off before trending again. Simply put, a breakout above the $105 price level in RH is the signal that shares are likely to kick off another leg higher. It may take some patience for that move to play out from here, but when it does, stay tuned.