The XRT, ETF for the retail sector, has been a terrific performer since 2009. However, the steep angle, much like with the XLY for the consumer discretionary stocks, on the longer-term timeframes continues to dampen the risk-to-reward profile for pushing longs with a time horizon beyond a day or two. Recently, major retailers like Macy’s, Wal-Mart, and now Nordstrom have seen negative post-earnings reactions, indicative of the market repricing its view of retailers.
With this in mind, looking at Ralph Lauren as a short idea makes sense. I previously discussed the stock in June, but as you can see it did not immediately roll back over for a short entry. Instead, the stock went and made what is potentially a double-top against its May highs. Longer-term timeframes continue to flash negative divergences, and you can see the bear flag over the past week or two has room to see price drop further before hitting its lower Bollinger Band.
I would place a buy-cover stop-loss above $180 (or lower), playing for a move into the $160’s, at least.
A close below $165 would confirm that double-top.
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