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This morning I am recommending a bullish trade on the SPDR S&P Retail ETF (NYSEARCA:XRT).
We may be in a bear market, but that doesn’t mean we should be bearish about every sector.
According to Mastercard SpendingPulse, which provides data on overall retail spending trends, spending increased 5.1% between Nov. 1 and Dec. 24 compared to the prior year.
This was the strongest growth in the last six years and brought the total for holiday sales to more than $850 billion this holiday season.
Retail is one sector that always benefits from consumer spending. While I don’t expect XRT to generate gains from this news throughout all of 2019, it should see increased prices in the near term.
If we look at the daily chart of the XRT below, we see shares are back down to levels not seen since last December.
Daily Chart of SPDR S&P Retail ETF (XRT) — Chart Source: TradingView
Last year, Mastercard SpendingPulse reported a holiday sales increase of 4.9%, and the XRT was able to rally into the start of 2018.
With stronger numbers coming in this year, and with the XRT already rebounding from its deeply oversold condition, it is probably one of a few select sectors that will rally into the new year.
That’s why I’m recommending a bullish naked put trade this morning:
Sell to open the XRT Jan. 18th (2019) $36 put at about $0.37.
A naked put write is a bullish position in which you expect the price of the underlying stock to increase.
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