Top 3 retail stocks to trade


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  • Buying and shorting opportunities exist in top retail stocks after major large-cap earnings issues.
  • The 5 great sporting goods (BGFV): Decent fundamentals, a big dividend, an overly bearish chart, and sentiment set up to buy BGFV stock hedged.
  • Macy’s (M): A nearby profit catalyst and a weak chart with a decline offer a bearish trade.
  • carvana (CVNA): Receives a bullish nod from analysts as oversold CVNA shares move into a key long-term test position for contrarian buyers.

Source: Borka Kiss / Shutterstock.com

The bears are back this week to squeeze the bulls on Wall Street. And far from being left out of risk-reduction activity, many of the market’s best-selling stocks are taking bigger losses for high-profile reasons.

This looks like a mulligan for investors looking for bargains on last week’s oversold low. As Friday’s close nears, an attempted large-scale rally hangs by a thread in the S&P500 and already disassembled in the Dow Jones Industrials with the blue chip average down almost 4% for the five-day period and hitting new year-to-date lows.

Disturbing publications of the results of the distribution giants walmart (NYSE:WMT) and Target (NYSE:TGT) this week, investors are increasingly concerned that inflation and risky consumer spending will continue to undermine corporate profits. And unsurprisingly, retailers with strong bearish interest were hit hard.

Today though, let’s take a look at three of the top retail stocks in the thick of the action and prepare investors for buying and short selling opportunities.

BGFV The 5 great athletes $12.08
M Macy’s $18.07
CVNA carvana $33.13

Big 5 Sporting Goods (BGFV)

Click to enlarge

Source: Charts from TradingView

The 5 great sporting goods (NASDAQ:BGFV) is the first of the top retail stocks to trade. And BGFV stock is a buy, with the caveat that investors will want a great defense to avoid possibly being sacked on the pitch.

BGFV shares retain a short interest of 43%. The sports retailer is down more than 15% on the week and hit new lows in more than a year. Technically, the weekly chart for this shorter stock reveals a pinched and now widening Bollinger Band and a bearish BGFV trend along the lower indicator line.

Honestly, that sounds worrying. But here’s the thing. Big 5 Sporting Goods reported a profitable profit on sales that largely matched high street forecasts earlier this month.

Also, as a Covid-related boost linked to people flocking to the great outdoors has played out and revenues are squarely back to pre-pandemic levels, profits of 41 cents are five times the results of the same quarter of 8 cents compared to 2019 suggesting that there are operational improvements worth buying.

With a well-supported dividend of 8.29% and a payout ratio of just 23%, positive cash flow and obviously bearish sentiment, it’s time to bet on the underdog. I would suggest buying this shortest stock with an actively managed, fully hedged equity collar.

Macy’s (M)

Click to enlarge

Source: Charts from TradingView

Macy’s (NYSE:M) is the next of our short-term best-selling stocks in the retail sector. And in my opinion, the M stock comes in the form of a short sale or a closing sale if you are a long stock buyer.

The mall’s iconic retailer is expected to report results next Thursday. The event could generate significant profits for investors betting against this shortest stock today if the M stock reaffirms the warnings from WMT and TGT with its own disappointing results.

In fairness, Macy’s has consistently exceeded earnings forecasts over the past year and benefited from some massive bullish reactions. But given the weaker operating environment, it’s all too likely to happen again.

Technically, a trendline failure this month sets up this shorter stock for further corrective testing before a bottom occurs. With the next major area of ​​support near $12 per share (downward channel and 76% level), M is the shortest stock to trade during the earnings event with an eye on a downside reaction.

I would go with a Weeklys May 27 $16/$14 for leverage and maximizing profits if correct, and ironclad protection and reduced premium exposure in the event of a bearish misstep.

Carvana (CVNA)

Click to enlarge

Source: Charts from TradingView

carvana (NYSE:CVNA) is the last of our retailers’ best-selling stocks to trade. This one has been such a car wreck that putting a small amount of venture capital into CVNA as a buyer seems like the right strategy.

Off the price chart, in late April, CVNA reported much larger than expected loss and job cuts. The announcement jolted investors as shares fell more than 10% to hit a nearly two-year low immediately after.

But now and with shares down about 70% from earnings and 92% from last summer’s record on almost daily reminders of poor conditions for used-vehicle buyers, a CVNA stock buy, without the sticker shock, take shape. .

Bank of America agrees. This morning, an analyst note said that despite macro headwinds, Carvana is “a fundamentally better way for consumers to shop and buy used cars.”

The brokerage maintained its buy rating, but reduced its price target from $225 to $80. However, the stock review still commands a 153% premium to the market price of this shortest stock of $31.60. Additionally, there is a nearby catalyst for higher fuels with stocks in an oversold test position from CVNA’s Covid-19 March 2020 bottom on capitulation-style volume.

As of the date of publication, Chris Tyler had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

The top 3 retail stocks to trade appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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