Chris Johnson

Don't Buy Into the Retail Hype

    Tweet This

Free Trading Guides

It's the end of hunting season for a variety of big game, but in mid-January, it will be like shooting the proverbial fish in the barrel for traders, as we'll have literally thousands of opportunities at our fingertips to profit from earnings hits and misses -- and unquestionably more of the latter as battered stocks struggle to survive these tough-and-getting-tougher economic times.

With so many companies reporting at the same time, where do you begin?

Well, I'll start by telling you where I wouldn't recommend being bullish.

Retail Gains, but I Don't Buy It

Despite declining sales numbers in October and November, despite all the poor economic and consumer sentiment numbers, and despite the crummy holiday season, the SPDR S&P Retail (XRT) ETF managed a stunning rally.

From its low below $15 in November, to its December high above $20, XRT gained a staggering 39% in less than a month.

What's up with that?

I've yet to see or hear one pundit try to explain this one. I can't, either.

But you can't argue with the tape. If you were bullish about retail and bagged some profits, you have my congratulations.

But now it may be time to pay up.

XRT has struggled for the past few weeks, falling away from the dual challenge of a double-top around $20.60 and its declining 50-day moving average.

The XRT is just one way to play the retail sector, as there is the more well-known Retail HOLDRs (RTH) ETF and, of course, individual stocks.