The retailers are taking a beating of late as holiday sales figures have been disappointing analysts and investors. For the most part, the selling has been widespread as investors figure that the seasonality of the trade has run its course. As is often the case though, there are opportunities within the sector for those willing to look.
Today’s three big stock charts looks at Priceline Group Inc (NASDAQ:PCLN), Kroger Co (NYSE:KR) and Costco Wholesale Corporation (NASDAQ:COST) as three diamonds in the rough Retail Sector.
Priceline Group Inc (PCLN)
Coming off of an overbought reading from its RSI, Priceline shares are setting-up as a potential short-term buy as we see the stock suffer from slight selling pressure. Year-to-date, we’ve seen the retail sector decline by 2.5%, while PCLN has gained 4.3%. Obviously, the fact that Priceline doesn’t have to deal with a holiday season sales target helps avoid some of the selling.
We’re expecting some weakness in the market, but PCLN shares have support from their rising 50-day moving average just above the $1,500-level, which should also act as round-numbered support from the chart.
Like most companies, Priceline won’t report earnings until later in the season which means that the headline risk for the company is lower. Sentiment towards PCLN diverges from the rest of the sector, as short interest suggests that there is a wall of worry in place for the shares to climb.
The leadership of the company in the retail space and the strong technical trends suggest that the stock is headed for another test of the $1,600-level, which is likely to trigger some short covering and higher prices.
Kroger Co (KR)
After a rough 2016, Kroger shares are making a technical transition back into an intermediate-term bullish trend. KR shares recently crossed back above their 200-day moving average, strengthening their technical outlook.
Another bullish indication for Kroger shares is the “Golden Cross” that is in the process of completing. This technical pattern is completed when a stock’s 50-day moving average crosses above its longer 200-day moving average. The pattern is a sign of a strengthening pattern and outlook.
KR stock will see a challenge in the short-term as its 20-month moving average sits above at the $35.83-mark. This trendline rejected shares in December, but the strengthening momentum should crack this technical ceiling.
A move above $36 will mark the stock’s emergence into a technical bull mark as it would then be trading above its 20-month moving average.
Costco Wholesale Corporation (COST)
Another retailer that is breaking the technical mold of the sector is Costco. COST shares are moving to break above short-term resistance at the $165 level which should increase the buying interest in the stock.
Shares of Costco recently benefited from support from their 20-month moving average to maintain their long-term bullish status. This support resides at $155.
A move above the $170-level will break COST into new high territory making it a standout within the sector. The stock is already widely ranked as a buy in the analyst community, so we do not expect to see upgrades move it higher, though there are building short interest positions on Costco that may result in a slight short covering rally.
Bulls should maintain their position in COST, as the stock is likely to forge new highs through the early part of the year.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
