Staples Up, Office Depot Down; Homebuilders Pull Back
Why is Office Depot (NYSE: ODP) the odd-man-out in Monday’s rally in office suppy retailers?
Shares of Staples Inc. (NASDAQ: SPLS) and OfficeMax (NYSE: OMX) were both up by more than 1% on the first trading day of the week. Staples, in fact, was highlighted in 7 Stocks You Need to Know for Monday, where we noted the stock’s first visit to oversold territory since climbing back into bull market territory in mid-February. Shares of OfficeMax were also trading in technically oversold territory after a multi-day pulback above the 200-day moving average before advancing in Monday’s session.
So far, shares of Office Depot (NYSE: ODP) have not yet participated in this rally. The stock pulled back by more than 1%t on Monday, closing lower for the fourth day in the past five. Office Depot rallied to new, six-month highs in late March, and the current selling in ODP likely includes a healthy amount of profit-taking in the wake of that advance.
The positive edge in the stock is more than a half a percent, but potentially more interesting is the one-point ratings upgrade Office Depot shares earned midway through trading on Monday. This ratings upgrade boosted the stock from a neutral, 7 out of 10, to a “consider buying” 8 out of 10.
The last time shares of Office Deport earned a “consider buying” rating of 8 out of 10, just under a month ago, the stock closed higher for three days in a row immediately afterward, gaining more than 10% in five days.
Weakness in the homebuilding sector continues into the second quarter, resulting in lower prices for companies like The Ryland Group (NYSE: RYL). RYL pulled back by 3% in Monday’s session, closing lower for a third day in a row. The sell-off has earned the stock a significant, short-term edge of more than 2% and a one-point ratings upgrade from 6 to 7 out of 10.
Also closing lower for three days in a row were shares of D.R. Horton (NYSE: DHI) selling off by a percent and earning a positive edge of more than half a percent in the short-term. Like Ryland, shares of DHI also have earned a one-point ratings upgrade and are now only one-point way from “consider buying” territory.
Exchange-traded fund options for trading the homebuilders include the S&P Homebuilders SPDRS ETF (NYSE: XHB) and the iShares US Dow Jones Home Construction Index Fund ETF (NYSE: ITB). Both XHB and ITB have closed oversold for the past two consecutive sessions, and earned major, single-day ratings upgrade from neutral levels of 5 and 6 out of 10, respectively, to “consider buying” ratings of 9 out of 10.
The positive short-term edge in ITB is more than 2%. Shares of XHB are set to open Tuesday morning with a positive edge of three-quarters of a percent in the short-term.
Join Larry Connors for a free, all questions answered preview and introduction to the all-new, Daily Battle Plan. Click here to learn more.
David Penn is Editor in Chief of TradingMarkets.com