I thought I would follow up on a commentary made on this blog back in May regarding the retail sector. Here is the original blog: http://www.valuetrend.ca/?p=2918
My take on the sector was that retail was in a consolidation pattern – a triangle to be exact. I noted that should retail break the triangle on either side, it might give guidance as to which way it would trade. I noted that, although the trend remained up at that time, there were growing signs of danger.
If we review the longer termed weekly chart above, you will note a break in the trendline. Momentum indicators are trending down, and the shorter termed moneyflow indicator (top pane) CMF has dropped below the 0 line. Relative strength against the S&P 500 is terrible. The longer termed moneyflow indicator is neutral (bottom pane)
On the daily chart, again lots of falling momentum and moneyflow studies can be seen. Most importantly, the 200 day moving average (red line) has just been cracked, although as you will see this can happen over and over during any consolidation phase – more importantly, the triangle has also been penetrated to the downside.
All in, retail had better pick up soon, or it would look like that sector is in for a world of hurt. My thoughts: Avoid the sector for now, and watch for signs of reversal before considering retail stocks.