Earnings Season Isn’t Over Quite Yet

I know. Nvidia (NVDA) reported their results, so the market thinks that the season is over…

That’s false.

This week, we’re going to see the beginning of the end of the season as the retailers take center stage.  You need to keep something in mind… this sector is one of the least watched groups of stocks, and right now, that’s good.

It’s good because many of the retailers are still riding high off their holiday sales number. That means that we could see a great quarter from the group. This, by the way, would be the one thing that could keep the rally going through the Week Nine phenomenon we just spoke about.

Looking for a bullish opportunity?

The chart of the Retail SPDR ETF (XRT) is perched for a short-term rally as they popped to new relative highs on Friday. These are the highest levels we’ve seen the retail stocks trade since 2022.

With a strong bullish trend in place, the XRT shares appear ready to rally from their current price of $75 to $80 – a 7.25% rally – fueled by good earnings showing over the next two weeks.

I must warn you though, this is what we refer to as a “stock pickers sector.” There are a few names like Best Buy (BBY), Big Lots (BIG), and Chewy (CHWY).

These three and other discount retailers have been lagging the market as consumers have been on a spending spree. I’m not expecting that to change unless we see another shot of rising inflation. That’s when these stores will get white hot again, when people are forced to shop for deals again.

On the other side of the coin, specialty and teen retailers like Abercrombie & Fitch (ANF), American Eagle (AEO), and Dick’s Sporting Goods (DKS) are at the top of my list to continue their strong bullish patterns through the next few weeks.

These stocks are being fueled by strong seasonal trends and the resurgence of the casual shopper.

Bottom Line

As I said, this is a “pick ‘em sector.” Your strongest names include those above along with Costco (COST) and Walmart (WMT) as the All-Stars.

The earnings won’t start flowing until mid-week, so expect the XRT to remain patient at the top of its range, waiting for the breakout.

Take note from last week’s Carvana (CVNA) report. This is one of the more highly shorted groups of stocks, so any positive surprises will cause incredibly sharp rallies.

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