The Canadian Technician

Has Retail topped before Christmas? Baah- HUMBUG! USA and Canada

Greg Schnell

Greg Schnell

Chief Technical Analyst, Osprey Strategic

Time to do a little detail in retail....

First of all, why are we on this subject? It's not big in Canada, but if retail is slowing we should be very aware. If retail is slowing before Christmas....there is gonna be a few growth stocks giving up some P/E.

Full disclosure, I have trades on in this area and specifically with some of the stocks mentioned.

First of all the USA ...

$RXl the Retail Index for the USA Weekly

XRT

Well let's talk about it.


This chart looks sad. Check the price action heading into Christmas the last 2 years. We accelerate right into Christmas closing near the highs for the year. Not this year, We have made two lower highs since the July peak. SAY WHAT? This is not good. More importantly....this is bad.

If the retailers are not being bought, going into Christmas, when are the stocks going to get any stronger? Look on the volume graph. Notice what normally would happen during US Thanksgiving. A big volume spike kicking off the Christmas charge. MACD showing major negative divergence on a weekly chart. What is divergence? The MACD should be tracking the price action. When it is not, the momentum is waning.  The MACD at Christmas both of the preceeding years - nice and high, near the top of the range like the price. This year, The MACD is barely above zero. As well, the most recent pullback on the MACD dropped below zero, a potential warning.

Lastly, the RSI gave a bear market signal in August. Who would respect that heading into the Christmas season? Well, it would have to get above 70 to cancel the signal. Not even close. Now we get the benefit of reading the chart.

This chart says sell to me.

Here is the Daily:

XRT Daily

CHeck out the Canadian Consumer Discretionary Index. There are only about 15 charts in the index, so it is very volatile. Notice how different the chart looks compared to the USA.

$SPTCD

Here is a perennial Canadian Retail stock. Looks Good.

Cdn Tire

Here is LLL.TO Weekly

Spending 3 weeks under the 40 week line before Christmas is not good.

LLL

LLL.TO Daily

LLL

Very weak. Some volume at the right side of the chart, so maybe it starts to get some support.

Here is AMZN testing 6 month lows instead of highs.

AMZN

Here is Macy's . Has been a very solid performer. Negative divergence on the MACD.

M

Here is Best Buy

BBY

For Homework, Check out MA, V, AXP on the NYSE. One strong, One ok, One weak.

Well, The grinch in me says avoid retail stocks.

 

Good Trading,

 

 

Greg Schnell, CMT

 

 

Greg Schnell
About the author: , CMT, MFTA is Chief Technical Analyst at Osprey Strategic specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More