The retail elephant in the room continues to push to new highs this week. Walmart held last week’s breakout and continued this week. As the market focuses on defensive sectors, Walmart is one of those stocks with huge cash flow, which investors like to lean on in defensive periods. With all of the indicators in the top right corner, this chart looks fine.
Another large retailer is Target (TGT). The stock made an intra-week high and we’ll need to watch for it to hold a breakout to new highs. Notice the momentum on the PPO bounce on the zero line in May. That is a nice bull trait where the stock keeps finding buyers and restarts the momentum trend higher.
Dollar General is another one of those low-price retailers. The chart has been pushing to higher highs for a while. The familiar trait of all these stocks and indicators positioned in the top right corner is telling. This is an industry move which is usually responsible for a large percentage of a stock’s gain. When the whole industry or sub-industry moves together, these can be powerful investment themes.
Five Below (FIVE)
FIVE just tested the 40-week moving average and is below the resistance level around 136. It wouldn’t take much to get to new highs. The indicators are off their highs but continue to hold up. As an example, a full stochastic indicator can pull back to the 40-60 level and turn back higher as part of a bull market move. An example is the February 2018 low on the chart below or scan the charts above. You’ll see some nice examples of intermediate trend lows that resume the uptrend.
Lastly is the Canadian stock Dollarama (DOL.TO). I have extended the time line for the chart to point out a couple of things. Notice how the StockCharts Technical Ranking (SCTR) went to a really low level during the downtrend. This suggests the stock is underperforming the vast majority of the stocks in the Canadian Stock Index. Now it is resuming the strong price action and moving higher.
Notice the change in behavior of the full stochastic. During the uptrend, it kept bouncing without getting into deeply oversold territory. The opposite behavior showed up during the downtrend. These indicators can help us establish a resumption of a strong trend, either up or down.
In summary, these low-price retailers are all excelling currently. This makes it easier to invest in the industry when the rising tide is lifting all boats.