What's Happening in Retail?

Aug 22, 2021 | Swing traders are making big money on retail

Weekly Newsletter - Week of 8.22.2021

What's Happening in Retail? 

This week we saw stocks throughout the entire retail industry pullback after a big week of earnings from companies like Home Depot, Walmart- Costco, Target, and others. Over the past several months, the retail industry has been one of the hottest sectors on the market. In fact, there are 13 different retail stocks within the S&P 500 that have all gained at least 80% this year. Additionally, the SPDR S&P Retail ETF is up over 75% in 12 months. 

Why Has Retail Been so Hot? 

The pandemic has had an interesting effect on all of retail. Many companies were forced to rapidly expand their e-commerce and digital operations. Many brick-and-mortar companies are now some of the most dominant players in the e-commerce space. Consumer staples like Target and Lowes are prime examples as both of their stocks are up over 35% in the last year. This has primarily been driven by their ability to focus on same-store pickup, delivery, contactless pickup, and other key factors in the pandemic age. 

Then retail had the added benefit of the great reopening. After spending the better part of a year indoors, people have been so eager to get outside and resume their lives! Retail was once again a prime benefactor from this shift in consumer spending. The apparel leg of retail sectors has been leading the bull market over the last several months. With personal savings inflated, due to depressed spending over the last 12 months, people have been excited to get outside and start spending money again. 

Retail Tumbling 

Shares of retailers and other cyclical components have begun to tumble over the last several weeks. Just recently, the Commerce Department showed that retail spending by consumers dropped sharply in July. Retail sales, a mix of online, store, and restaurant sales showed an overall drop of over 1% in July. The number of transactions being completed inside stores also decreased. This was a prime reason pandemic winners like Home Depot and Lowes each dropped over 4% this week. This poor news had a trickledown effect, as the small-cap index also plunged this week. The uninspired economic data came just one day after China reported slower than expected growth for their recent quarter as well. This week, we also heard more discussions about the Fed beginning to scale back their economic recovery policies. This week, we'll be looking for new data points that may represent a change in investor sentiment. 

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

DraftKings Making More Bets 

Last week, we reported that DraftKings (DK) was looking to become a new player in NFT and digital art game. With so many opportunities for signed memorabilia or rare items, it was a no-brainer the stock jumped almost 5% on the news. This week, DK just announced a new plan to acquire Golden Nugget online gaming in an all-stock transaction- the deal is valued at over $1.5B. 

The acquisition will allow DraftKings to leverage the Golden Nugget’s established iGaming experience. Additionally, the Golden Nugget already has over 5 million customers in its database. CEO for DraftKings cited how this deal would immediately allow them to reach a broader market. They see many opportunities to cross-sell their customers across the growing platform. This is a huge deal for DK, as it’s partnering with another proven global player in the gaming space. With much of DraftKings technology built in-house, this is also expected to help drive down the total cost to operate the Golden Nugget. With the NFL season right around the corner, DK is doing a great job building excitement for its platform. 

Bring Out the Booster Shots 

This week’s Covid updates center around the growing concern additional booster shots might be needed for the vaccinated. Studies continue to be conducted which may point to a drop in overall antibody protection months or weeks after receiving the vaccine. As with the entire vaccination process, we continue to gain more information day by day. 

Upcoming Economic Reports

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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