The retail sector takes center stage this week. I doubt it will be enough to take all the attention away from debt ceiling negotiations, but it should provide some trade consideration.
Most of the big-name big-box stores will be reporting, including Walmart (WMT) , Target (TGT) , TJX Companies (TJX) and Home Depot (HD) . Performance has been split among these four. Given their strong charts, I could see considering trading any breakouts in WMT or TJX, or perhaps you prefer to stick with an ETF such as the SPDR S&P Retail ETF (XRT) .
Ironically, the XRT won't expose you to any of the names above. Its top holdings include Carvana (CVNA) , Amazon (AMZN) and Ollie's Bargain Outlet (OLLI) , along with GameStop (GME) .
While CVNA and GME can make intriguing day trades on a standalone basis, gaining exposure to them through an ETF feels inefficient and not the type of risk-reward scenario I have in mind.
A better ETF consideration for this week is the VanEck Retail ETF (RTH) . Amazon (AMZN) holds the top spot at more than 20% of the fund, so it is worth noting this is a strong proxy for the name, but at least it is a good-looking name.
Home Depot and Walmart combine for almost another 18% of the holdings, split just about evenly with TJX and Target coming in just over 4% each.
RTH has been trading in a wide channel since early April. One could argue that the channel has higher highs and higher lows, but it's ever so slight. With shares trading above the short-term and longer-term exponential moving averages (EMAs), bulls hold an advantage.
Zooming out, the price action resembles a tilted inverse head-and-shoulders pattern. Folks love to call out this pattern; however, in my experience, the success rate of trading has been random at best, so I'm focused on the channel and the moving averages.
A break above $167 could push RTH to the $172 level. The biggest risk here is gap risk. Given the large influence of the top three holdings and two of them reporting this week, odds favor RTH gapping higher or lower on Tuesday and Thursday. My focus will be trading an upside continuation breakout if earnings from either Home Depot or Walmart trigger a move higher.
Outside of the debt ceiling discussions and retail earnings, the other potential major catalysts this week are Fed speakers, with New York Fed President John Williams on the docket twice and Fed Chairman Jerome Powell once. Given how recently we heard from the Fed on interest rates, I don't anticipate any change in rhetoric. Still, I'll watch the headlines and expectations of the next two interest rate decisions while Williams and Powell speak this week.
