The bull herd continued its stampede across Wall Street yesterday as upbeat economic data kept the bears from resurfacing. Domestic equity benchmarks extended gains into uncharted territory after weekly jobless claims data came in better than expected; the weekly report showed that 346,000 people had filed for unemployment benefits, marking a healthy improvement over the previous reading of 388,000 [Download 101 ETF Lessons Every Financial Advisor Should Learn].
The State Street SPDR S&P Retail ETF (XRT, A) will make its way into the spotlight later today as investors react to the latest retail sales data from March. XRT could be in for a volatile session if last month’s sales suggest economic uncertainty; analysts are expecting for the monthly figure to post a contraction of 0.1% versus last month’s reading of positive 1.1%.
U.S. retail stocks have enjoyed an absolutely stellar run-up since the start of 2013; in fact, XRT is trading at all-time highs while enjoying a hefty 17% return year-to-date. When considering the chart below, it’s quite apparent that this ETF has been climbing within a very steep upward-sloping trading channel (blue lines) since the start of this year. What’s even more impressive is the fact that XRT has been able to grind higher along its upper resistance boundary for consecutive trading sessions, showcasing the sheer bullish momentum that has been driving this ETF [see How To Swing Trade ETFs].
Entering into a short position at current levels is a bit speculative seeing as how this ETF has a history of trading above its upper channel boundary for days, even weeks, before correcting. Likewise, establishing a long position is also risky given the stellar run-up thus far. As such, traders looking to get involved here might be better off waiting on the sidelines until a more attractive opportunity manifests itself [see ETF Technical Trading FAQ].
If the latest retail sales report comes in above expectations, XRT could continue its ascent; in terms of upside, this ETF has no clear resistance levels in sight as it is trading in uncharted territory. On the flip side, disappointing sales data could put a dent in the bulls’ confidence and inspire profit taking pressures; in terms of downside, XRT has near-term support around $70 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.