The bulls pumped the breaks a bit on Tuesday as profit-taking pressures inevitably swept in following last week’s stellar run-up. The Dow Jones Industrial Average continued its green streak, however, after small business confidence data came in better than expected, while both the S&P 500 and Nasdaq closed in shallow red territory as the closing bell rang.
Investors will focus their attention on the homefront later today as February’s retail sales report hits the Street at the opening bell. As such, the State Street SPDR S&P Retail ETF (XRT, A) will be on our radar screen as this fund could see volatile trading after markets digest the latest sales data. Analysts are expecting the February retail sales figure to post growth of 0.7% versus last month’s reading, which came in at 0.1% [see How To Take Profits And Cut Losses When Trading ETFs].
XRT has been climbing higher along rising support (blue line) for the last year. This well-known ETF has enjoyed a stellar run-up thus far in 2013, soaring into uncharted territory as improving sentiment has resonated well for nearly every corner of the U.S. equity market. Traders looking to tap into this ETF’s uptrend will need to be patient and wait for a pullback, as jumping in at current levels is a bit speculative for those with a shorter-time horizon. XRT may very well continue to march higher without interruption, however, we advise traders to wait for a pullback given that the stock is already sitting on hefty gains since its last correction in late-February of this year [see ETF Technical Trading FAQ].
Investors should note that once XRT starts a correction, it has a tendency to re-test support at its 200-day moving average (yellow line) as seen in June and November of last year [see also 101 ETF Lessons Every Financial Advisor Should Learn].
If the latest retail sales data paints an optimistic outlook for the health of the domestic consumer, XRT may very well surge higher; in terms of upside, this ETF has no clear resistance in sight as it is trading in uncharted territory. However, a disappointing release may inspire profit-taking pressures; in terms of downside, this ETF has support at $66 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.