Let me just say this: The profit-taking that struck stocks across the land last week was a godsend. It allowed many overstretched sectors the opportunity to digest recent gains, retreating toward more sustainable trendlines. Look no further than retail stocks for a prime example. The SPDR S&P Retail (ETF) (NYSEARCA:XRT) has flourished in the post-election world.
Last month’s ascent carried XRT to a new 52-week high at $47.14. As alluring as it is to grab shares at a new high, however, the prudent thing to do is wait it out for a lower-risk entry.
In this case, the patience of onlookers has paid off: XRT shares have now retraced five days toward the 20-day moving average, creating a number of attractive dip buys across the board.
I’ve scoured the sector for you and these are three of the best plays.
3 Retail Stocks to Shop for Profits: Nordstrom (JWN)
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Nordstrom, Inc. (NYSE:JWN) stock kicks off our retail stock list with a mighty fine-looking price chart.
JWN stock’s early-November earning announcement ushered in a high-volume rally that carried shares to a new 52-week high. And this year’s recovery sufficiently turned all major moving averages higher.
That means JWN has returned to an uptrend across all major time frames. Last week’s price retreat carried shares to the rising 20-day moving average, which is often a gathering ground for dip buyers. If the stock starts to climb from here, it’s as good an entry point as any.
Buy the JWN Jan $55.15 calls for $3.50.
Retail Stocks to Shop for Profits: Macy’s (M)
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Macy’s Inc (NYSE:M) stock is also in the midst of a rousing price recovery. Really, the action in retail stocks of late has wonderfully demonstrated just how price charts bottom.
A number of retail stocks experienced harrowing price plunges in 2015. Downtrends littered the landscape, especially during the back half of the year.
Fortunately, 2016 has been a turnaround year. Slowing momentum, base building, and finally, price recovery has told the story for M stock and others retailers. Right now, Macy’s price chart boasts a high-quality bull retracement pattern.
Last week’s low-volume retreat to its rising 20-day moving average created a classic dip-buying opportunity. The time to pounce is now.
Buy the M Jan $42.50 calls for $2.10.
Retail Stocks to Shop for Profits: Best Buy (BBY)
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Best Buy Co Inc (NYSE:BBY) rounds out today’s trio of retail stocks with a similar story. Like Nordstrom’s, Best Buy’s latest ascent was driven by earnings.
In fact, the past two earnings announcement have generated notable positive price gaps for BBY stock.
Last week’s pullback was the first chance spectators have had to buy a dip following BBY’s mid-November moonshot.
The fact that Best Buy was only able to cobble together a two-day retreat before buyers stepped in to halt the decline is telling. Shallow pullbacks are a hallmark of strong stocks.
Buy the BBY Jan $46.04 call for around $2.36.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
