Stocks have been under increasing pressure over the last few weeks as interest rate fears continue to grow.
The NYSE Composite Index fell to test its 200-day moving average on Tuesday for the first time since the beginning of April. Yet breadth and sentiment measures suggest we have further to fall.
One of the groups leading the way down is retailers, which have been lagging the market since late March on weak retail sales results and ho-hum monthly same-store sales performances.
On an annual basis, retail sales have been slowdown since the summer of 2014 with no evidence yet of a turnaround despite strong job gains.
The persistent weakness is setting up ugly looking breakdowns in the stocks of a number of big-box stores. Here are five to watch out for.
Big-Box Retailers: Home Depot (HD)
HD stock is up a market-beating 5% for the year-to-date. However, share are rolling down out of a consolidation pattern going back to February and should be good, at the very least, for a test of the late April low.
The weakness comes despite a strong Q1 report back in May. I’ve recommended the HD stock July $110 puts to my Edge Pro subscribers.
Big-Box Retailers: Lowe’s (LOW)
LOW shares are at the do-or-die point after falling to retest triple-bottom support near $67.50. TAG analysts noted that although the company reported strong Q1 results they fell short of heightened expectations as sales growth lagged HD’s performance.
A break to the 200-day moving average for LOW stock, which hasn’t been touched since the summer of 2014, looks likely.
Big-Box Retailers: Costco Wholesale (COST)
COST shares have been on the slide since March — down almost 6% in the past three months — and have suffered acceleration to the downside after reporting weaker-than-expected quarterly revenues in late May as lower gasoline prices weighed on overall results.
A drop below COST stock’s 200-day moving average looks likely, which hasn’t happened since last summer.
Big-Box Retailers: Walmart (WMT)
WMT has been slammed recently, down more than 19% from its high in January, as its business continues to struggle. The company reported a top- and bottom-line Q1 miss on May 18 and lowered forward guidance due partially to the impact of higher wages for its workers.
The recent shareholder meeting didn’t help sentiment, as the company talked up the fact that it’s in an investment period that will weigh on earnings growth for the next three years.
Shares of WMT stock are testing a support range going back to 2013. A break here would put the 2012 lows near $63 in play.
Big-Box Retailers: Target (TGT)
TGT stock has managed a nearly 5% gain for the year-to-date, but most of the gains came early in the year. Target is now drifting lower within a multi-month trading range. MKM Partners worries that tough year-over-year comparisons in coming quarters could weigh on the stock.
Shares pirouetted of their 200-day moving average back in October, and could do so again if the recent trend of spendthrift consumers continues.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
