Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
Retail HOLDRs (AMEX:RTH) – Retail stocks had an amazing run off the 2009 lows, and earlier this year, this exchange-traded fund (ETF) posted an all-time high. For two years, many investors argued that the “rise of the retailers,” so to speak, wasn’t’ justified. And as RTH formed a double-top and hit new all-time highs in 2011, some of those calls have come to fruition.
On the weekly chart looking back to mid-2009, we note the uptrend (white line) that is still in place. The ETF again bounced off that support line in early August.
On the daily chart looking back to September 2010, note the intermediate uptrend that the Retail HOLDRs fell through in early August. After finding a bottom at the aforementioned longer-term uptrend, the ETF has been in bounce mode but will soon find serious resistance. The triple-layer resistance in this case is made up of the intermediate uptrend (white line) and both the 50-day and 200-day simple moving averages.
With the broader market still in oversold territory and currently enjoying a relief bounce, it is a little too early to short RTH. However, if and when this ETF gets into the $105-$106 area and the S&P 500 is around the 1,240-1,260 area, a high-probability short setup might occur. At that point, initial stops could be set near $110 with a final profit target as low as $90.
