Below we have run our trading range screen on the 30 largest S&P 500 retailers. For each stock, the dot represents where it’s currently trading within its range, while the tail end represents where it was trading one week ago. The black vertical “N” line represents each stock’s 50-day moving average, and moves into the red or green zone are considered overbought or oversold.
Brick-and-mortar retailers went through a rough patch when they reported earnings in mid-May. The group bounced back a bit towards the end of May into the first few days of June, but they’ve pulled back a bit over the last week. Of the thirty largest retail stocks, fourteen are currently oversold while just four are overbought. Amazon.com (AMZN), Dollar General (DG), Dollar Tree (DLTR) and Ulta Salon (ULTA) are the four overbought stocks, but they have all pulled back from even more overbought levels a week ago.
Home Depot (HD), Best Buy (BBY), CarMax (KMX), and Signet Jewelers (SIG) are the most oversold retailers. When looking at oversold stocks that may be due for upside mean reversion, we like to focus on ones that have already “turned the corner,” or companies that are in the oversold region but have moved higher within their trading range over the last week. Of the four oversold names just mentioned, Home Depot and Signet are the only two that fit this criteria.
In the screen below, we also include each stock’s year-to-date percentage change. Notice any trends?