I hope everyone had a happy Thanksgiving! Now, while the Thanksgiving week is typically a slow trading week on Wall Street, the following week is bound to be anything but for retail stocks.
Traders are going to be champing at the bit today to act on all of the Black Friday retail sales data that came out over the weekend. They will also be eagerly awaiting the release of the Cyber Monday retail sales data later in the week.
This is make-or-break time for many retail stocks, but not all retail stocks will be treated equally. You see, Black Friday and Cyber Monday tell very different stories.
Black Friday is all about big-box retailers and their attempts to lure shoppers into their stores by offering amazing sales on some items in the hope that shoppers will end up spending more while they are there.
Cyber Monday is all about online retailers and their attempts to lure shoppers to their sites by offering amazing sales on some items in the hope that shoppers will end up spending more while they are there.
On the surface, it looks like these are quite similar narratives. Once you dig a bit deeper, however, you will see that the Cyber Monday crowd is winning.
Take a look at the chart of one of the Black Friday stocks: Macy’s Inc (NYSE:M).
It doesn’t get much more Black Friday than Macy’s — the company even hosts the Thanksgiving Day parade. But as you can see in Fig. 1, M stock has seen its share price plunge as costs have risen and revenues have slowed, as consumers have scaled back their in-store spending.
Compare this chart to the performance of the Cyber Monday stock, Amazon.com, Inc. (NASDAQ:AMZN), in Fig 2.
Amazon has soared higher along with the increasing number of consumers moving to the convenience of online shopping and free shipping — a trend that has accelerated as more of the things we buy (music, movies, books, etc.) are now sold in digital formats.
The trend we are seeing play out in the retail sector — where some stocks are viewed as winners while others are viewed as losers — is a microcosm of the larger trends we are seeing play out in the market in general.
There are plenty of opportunities in retail stocks to take advantage of both bullish and bearish price moves, but you’ve got to know what you’re investing in.
For instance, many traders turn to exchange-traded funds (ETFs) to gain exposure to a particular sector or market segment. In the retail space, that means many traders turn to funds like the SPDR S&P Retail ETF (NYSEARCA:XRT) or the Market Vectors Retail ETF (NYSEARCA:RTH). But just because the names of these two funds sound similar doesn’t mean the holdings within the funds are similar.
For example, as you can see in Fig. 3, the top holding in XRT is Urban Outfitters, Inc. (NASDAQ:URBN), with AMZN nowhere to be seen in the top 10 holdings.
You’ll also notice that Wal-Mart Stores Inc (NYSE:WMT) is nowhere to be seen on this list of retail stocks.
Conversely, as you can see in Fig. 4, RTH lists AMZN as its top holding, accounting for 18.41% of net assets.
This is a good reminder to make sure you do your homework so you know exactly what it is you are investing in. Names can be deceiving.
Volume and volatility slowed down last week because of the Thanksgiving holiday, but the last week of November and the entire month of December are bound to be action-packed.
That’s because we’ll be awaiting full data from both Black Friday and Cyber Monday sales numbers, the November employment data, the upcoming monetary policy decision from the Federal Open Market Committee (FOMC), the continued funding of the federal government and, last but not least, the tax-reform package from the Senate.
You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.