Tuesday, June 01, 2010

Picking Your Battles

This is a little case study of monthly bars of 4 retailers: WMT, COST, TGT and BIG. The thing they all have in common is that the technicals are decidedly negative. All 4 also suffered a major drawdown in the Fall of 08 and into the first 2 months of 09.
Technically speaking, of the 4, I trend to favor WMT as a trading equity. Now, I understand that some folks would rather eat ground glass than put money with WMT, but I'm not one of them.
What I like about WMT is the 16 point (36%) range over the past 8 years. And as a reflection of its underlying power, it was first out of the gate after the 08 implosion. More than anything, this bias is a reflection of my focus on trading range and mean regression methodologies for short term trading. Clearly COST and TGT have been great trending stocks, both of which doubled from 03 to 08. The other side of this coin is that both were back to 04 levels on 09.
WMT was actually below 04 levels in 09, which sounds rather dismal until you realize that the average price of WMT 2000-2010 has been $ 50.50, precisely where it is right now.
As a consumer I frequent all four of these retailers and without making any subjective statements about the ambiance of these venues, BIG is the current high flyer on the charts and (of the 4) performs best on Project Z, closely followed by WMT, although the trading cycles are completely different.


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