Skip to main content

Retail Stocks Won't Join the 2017 Rally

Stocks have rallied since the Trump election and the Dow (DJIA) just passed 20,000 for the 1st time ever, but there is one sector of the stock market that just won't join the party.

Dow Jones Industrial Average 20,000 DJIA Stocks Chart
Dow Jones at 20,000.


Retail stocks continue to lag the overall market, a theme highlighted in our retail stock report from December 2016. While the post-election period saw a boost for many industry groups and the leading stock indices, the consumer retail sector is showing further signs of deterioration. 

Here's a technical snapshot of some of the leading mainstream retailers and retail brands. Included are charts of Nike (NKE), Under Armour, (UAA), Ralph Lauren (RL), Macy's (M), Wal-Mart (WMT), Target (TGT), Kohl's (KSS), and Dollar Tree (DLTR).


Retail Stocks Charts Nike Under Armour Macy Wal-Mart Target
Retail stocks continue to under perform the overall market.


While the market has been offering up many opportunities in stronger groups such as financial services, banks, steel, construction, chemical stocks, semiconductors, tech, and cannabis, these widely-owned retail stocks (with the exception of NKE) have continued to slide. 

Strategy notes: Finding Winners, Cutting Losers

Avoiding these stocks, and other market laggards, has been a key part of my "defensive strategy" for the new year. While many investors prefer to diversify away their risk by holding a multitude of stocks in many industries, I choose to avoid these weak stocks and weak industry groups altogether. 

This gives me the mental, and financial, breathing space to search for potential winning stocks in strong industry groups.

As I wrote in our last report on the weak retail stocks

"...As a position trader focused on larger multi-week and multi-month moves, I want to find stocks that are set to trend higher. At present, neither of these [UAA and NKE] stocks fit that bill; they are fighting against the tide (downtrends).  

We want to buy stocks that are entering new uptrends or stocks that still have some gas in the tank to move higher. This puts the wind at our back, so to speak.

While many stocks and industries have benefited from the recent "Trump rally", retail shares have been quick to give back much (or all) of their gains. This is a red flag for the industry and for many of the individual retail stocks..."

The temptation to hold declining stocks is strong for most retail traders and investors. If you start cutting your losing investments earlier, you will find more financial and emotional breathing room to focus on your winning investments and trades. 

The US stock market is trading at new all-time highs (see: DIA, QQQ, SPY). Focus on buying stocks that are participating to the upside. You don't to spend another leg of the bull market holding laggards and marginal trades... you want to buy and hold winners. This is something I have to remind myself of from time to time! 

Subscribe to the free Finance Trends Newsletter. You can follow our real-time updates on Twitter. 

Popular posts from this blog

Nasdaq credit rating junked.

S&P cut Nasdaq's credit rating to junk status citing debt burdens and its questionable strategy to buy a controlling interest in the London Stock Exchange. Financial Times reported that the exchange's counterparty credit & bank loan rating were lowered fromm BBB- (lowest investment grade rating) to BB+. The change will increase Nasdaq's borrowing costs should it wish to pursue aquisition targets. For an earlier look at the exchange consolidation trend that brought about Nasdaq's push for a stake in the LSE, please see "Exchange fever" .

Clean Money - John Rubino: Book review

Clean Money by John Rubino 274 pages. Hoboken, New Jersey John Wiley & Sons. 2009. 1st Edition. The bouyant stock market environment of the past several years is gone, and the financial wreckage of 2008 is still sharp in our minds as a new year starts to unfold. Given the recent across-the-board-declines in global stock markets (and most asset classes) that have left many investors shell-shocked, you might wonder if there is any good reason to consider the merits of a hot new investment theme, such as clean energy. However, we shouldn't be too hasty to write off all future stock investments. After all, the market declines of 2008 may continue into 2009, but they may also leave interesting investment opportunities in their wake. Which brings us to the subject of this review. John Rubino, author and editor of GreenStockInvesting.com , recently released a new book on renewable energy and clean-tech investing entitled, Clean Money: Picking Winners in the Green Tech Boom . In Clean ...

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4. ...