Stimulus euphoria bolstered markets into green territory on Monday morning as investors expressed their optimism that the Federal Reserve would maintain its bond-buying program while the European Central Bank is expected to slash rates later this week. Bullish sentiment was further fueled by upbeat economic data after pending home sales from March showed a 1.5% increases compared to last month’s gain of 0.9% [Download 101 ETF Lessons Every Financial Advisor Should Learn].
Our ETF to watch for the day is the SPDR S&P Retail ETF (XRT, A) as it could experience volatile trading following the latest consumer confidence report. Analysts are expecting for the confidence index figure to come in at 61.3, marking a modest improvement from last month’s reading of 59.7.
Consider XRT’s one-year daily performance chart below. Notice how this ETF has been climbing higher within a fairly well-defined upward sloping channel (blue lines) since the start of 2013; it’s fairly easy to see how this ETF has endured short-lived pullbacks after each instance of grinding along its upper resistance boundary. Currently, XRT is showing signs that it may pullback again judging by the fact that its most recent high is just cents away from its previous peak set on 4/11, after which it proceeded to re-test the channel’s lower support boundary [see 17 ETFs For Day Traders].
The technical pattern at hand suggests that a pullback is more likely than a rally for XRT; nonetheless, today’s consumer confidence data may serve as the much-needed fundamental catalyst that propels this ETF past resistance [see How To Swing Trade ETFs].
If the latest economic data comes in better-than-expected, retailers may be in for a very green day; in terms of upside, XRT has fairly stiff resistance around $74 a share, which is where it recently had to pump its breaks. On the other hand, disappointing consumer confidence data may suggest that economic conditions really are deteriorating when factoring in last week’s lackluster GDP report; in terms of downside, XRT has major resistance 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.