Trading By the Numbers: 3 Runaway Retail Stocks
Despite fears of an economic slowdown, the current rally continues to be the tide that lifts all boats. And increasingly, many of those boats can be found in the retail sector.
Stocks like Companhia Brasiliera De (CBD), for example, have closed higher for five days in a row, buyers (and short-covering traders) sending the stock on a run of more than 20%. Carmax Inc. (KMX) gained nearly 2% on Wednesday alone, finishing up for a fifth consecutive trading day (six out of the past seven).
Even more eye-popping is the seven-day rally in Lumber Liquidators Holdings (LL), a stock that was up nearly 3% in Wednesday’s session.
When these short term trends reverse, when early investors decide to trim gains and those who had made big money shorting these stocks decide to take another run at them from the short side, the moves to the downside could be sharp and sudden in stocks like these. All three, in addition to higher for multiple consecutive sessions without a single-day’s pause, are deeply in overbought territory and are trading below their 200-day moving average – a critical level below which short term rallies tend to be suspect.
Traders looking to fade the current rally by trading stocks that may have moved too far too fast to the upside may want to include the three overbought retailers in today’s report in their watchlists over the next few days. On the other hand, active investors hoping to take positions in retail stocks like these at lower levels may not have long to wait.
The stocks in today’s report were drawn from the data and research available through PowerRatings. To find out more about PowerRatings, click here.
David Penn is Editor in Chief of TradingMarkets.com