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Over the past several months, this market has seen more backing and filling than a dentist with a waiting room full of cavity-ridden patients. Fittingly, the recent multi-week rally through the end of October has quickly fallen back to Earth. The aggressive manner in which this pullback has occurred has caught many off-guard, since a benign consolidation would have made life easier for the bulls, but then again it can be argued that the market’s modus operandi is to render the majority discombobulated.
Putting the ever-changing headlines out of Europe to one side, if you look solely at the price action on a chart like the XRT, ETF for the retail sector, you can see that it reveals we are back to the scene of the breakout. There are also the now-rising 20 and 50-day moving averages that should help add some confidence to potential dip-buyers. Of course, none of this means anything if the buyers fail to step up to the plate, but this setup “should” be a good opportunity for a high probability long upon any signs of stabilization.
Either way, it is tough to deny that many retail plays showed relative strength during the last two sessions’ bloodbaths. If the market does what it “should” here, I am focused on the following ideas.
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