SPDR S&P Retail (ETF) (XRT) — This fund seeks to track the performance of the S&P Retail Select Industry Index, employing a sampling strategy that invests at least 80% of its assets in the index’s securities.
The current top 10 holdings in XRT are Burlington Stores Inc (BURL), Childrens Place Inc (PLCE), Five Below Inc (FIVE), Genesco Inc. (GCO), Finish Line Inc (FINL), Wal-Mart Stores, Inc. (WMT), Macy’s, Inc. (M), Kohl’s Corporation (KSS), Dollar Tree, Inc. (DLTR) and Dollar General Corp. (DG).
After a poor performance last year, with XRT falling almost 9% compared with only a 0.7% loss for the S&P 500, the ETF has outperformed so far in 2016. Year to date, XRT is up 0.3% while the broader market index lost 4.7%.
On Monday, XRT broke from a resistance line at $42, which is now its support line. Higher-than-average volume accompanied the breakout, but the internal MACD indicator shows the fund is overbought after the run up.
I expect XRT to pull back to support at $42 within the next two weeks, which will be our buy point. The target is the resistance line from the tops in September and November at $47. If successful, this trade will result in a 12% gain, plus dividends. XRT has a current annual yield of 1.4%.
Investors should also consider buying the fund’s top holdings for the chance at greater appreciation. For instance, last month Morgan Stanley upgraded Children’s Place to “Overweight” and raised its price target to $89, which is almost 30% above the current price.
