A poor day and a close at the lows on Tuesday followed by a gap-up open Wednesday morning, caught many traders leaning the wrong way. The narrative about a slowing economy was undermined by strong reports from retailers and Target (TGT) in particular.
The opening strength is starting to cool off 45 minutes into the trading day, but this action is a good illustration of volatility within a trading range. The folks that are betting on a big-picture view of the market will have to be patient while the shorter-term traders battle things out.
Target is having a particularly strong impact on market sentiment as it undermines the arguments about a slowing economy. Target management stated that tariffs are not a concern until 2020 and is predicting increased same-store sales the remainder of the year. It is tough to think that the economy is on the brink of slowdown when retailers such as Target, Home Depot (HD) and Lowe's (LOW) are acting so well.
When the market is in a trading range the proper course of action is to trade it and keep time frames short. Twitter TWTR, which I discussed Tuesday, is acting well and I'm inclined to add to my position. One of the better acting low-priced, small-cap names on my screen is Digital Turbine (APPS) , which is breaking to new highs.
I'm playing the retail theme this morning by adding Revolve Group (RVLV) . This was a hot IPO that described itself as a "next-generation fashion retailer for Millennial and Generation Z consumers." The company offers curated apparel and footwear and uses "influencers" to drive demand. The company priced its IPO at $18 and the stock went quickly over $48. It then reversed and has now found support around $24. I'm taking some shares Wednesday morning.
On Aug. 9, an analyst at Jefferies raised his target on RVLV to $65 from $60. He stated that the company's second-quarter results illustrate "robust" growth in active customers and orders, while its margins continue to rise. "The quarter highlights the power of the Revolve platform to both aggregate consumers and influencers and scale profits."