Sears Has Become a Disaster

 | Sep 14, 2018 | 11:05 AM EDT
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shld

We have some choppy action again today but there is a slight positive bias still. Breadth is running almost exactly flat but there are over 200 new 12-month highs to around 100 new lows which tells us that there are still some pockets of positive momentum. Adobe ADBE is the leader on momentum screens but there are others like SpotSpotter (SSTI) and Advanced Micro Devices (AMD) are attracting attention.

There is some very active pockets of speculation still in the pot stocks and a few other names like NIO (NIO) which is a China electric car play that had an IPO this week.

I continue to favor Sarepta (SRPT) in the biotechnology sector but my trading has not been as active the last few days due to a lack of setups that I prefer. There is plenty of stocks inching up but the choppiness has made it more difficult.

The market seems to be a bit distracted by all the hurricane coverage which will likely continue all day. It creates a bit of a negative mood to see the constant coverage of the damage being down.

Speaking of disasters, it is hard to not be fascinated by the disaster that Sears Holdings (SHLD) has become. It is the poster boy for the havoc that internet retailers have wrecked on brick and mortar retailers. Anyone over a certain age will have memories of shopping there and reading their Wish Book catalog which was the 'web surfing' of pre-internet days.

However, despite this fascination with Sears, it shouldn't even been on your trading and investment screens. It has been in a downtrend for a decade and it is inevitable that It will eventually no longer exist in its present state.

The stock is bouncing today on news that it "only' lost around $500 million this quarter and same store sales were down 3.9%. This was better than the very low expectations but the company notes that 'we have yet to achieve our goal of returning to profitability'.

The company will keep closing stores until it finally hits bottom which may be a good strategy for them but it isn't a very enticing investment theme.

What many investors forget is that the 'buying low' approach should only be used when there is real value. Just because a stock is down substantially over many years doesn't mean it won't continue to go lower. In fact, the likelihood is that when a trend is that persistent for that long it is likely to continue.

It is fine to be nostalgic about Sears but it should be ignored from an investment standpoint. Even if it does survive there will be many other stocks that will perform much better.

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