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November 11 2019 - Walmart, Lululemon Lead Five Stocks Near Buy Points After Bullish Rebounds By Investors Business Daily
Walmart (WMT) stock is in buy range while top retail stocks Lululemon Athletica (LULU), Costco (COST), RH (RH) and Burlington Stores (BURL) are near buy range as retailers get ready for a busy holiday season.
Retail Stocks To Buy And Watch Among top retail stocks to watch: Lululemon stock, Burlington Stores stock and RH stock have the highest-possible IBD Composite Rating of 99. Costco stock has a 96 rating and Walmart stock only has a 78 rating. The Composite Rating looks at key fundamental and technical metrics like earnings and sales growth, relative price performance, return on equity and profit margins. Top stocks typically have a Composite Rating of 90 or above ahead of big runs.
Costco stock, RH stock and Lululemon stock are all IBD Leaderboard stocks.
All of the stocks also have found support at their 50-day lines. The 50-day line — or the 10-week moving average when looking at weekly charts — is often a place where mutual funds will step in and support a stock.
The upscale athletic apparel maker gapped out of a flat base on Sept. 6. Lululemon stock moved sideways, forming another flat base with a 204.54 buy point. Shares popped into buy range in early October and held near the entry point for a few weeks before drifting lower. On Nov. 5, Lululemon stock near triggered the 7%-8% sell rule, closing just below the 50-day line. But Lululemon stock reclaimed that key support the next session and is flirting with reclaiming its buy point, closing Friday at 204.13.
For most of 2019, Lululemon stock has found support at its 50-day line. With a "stair-stepper" stock like LULU, investors might consider buying on pullbacks to the 10-week line rather than a traditional entry.
Lululemon stock was Friday's IBD Stock Of The Day.
Lululemon's latest earnings report in early September showed another quarter of strong bottom-line and top-line growth. Lululemon stock is ranked No. 13 on the IBD 50 list. The list is comprised of companies with strong relative price strength and fundamentals.
Burlington Stores Stock
The off-price apparel retailer is 3.2% below a 209.46 buy point. The flat base is part of a base-on-base pattern.
Shares have been basing since gapped up on Aug. 29 following the latest Burlington Stores earnings report. But with the stock market rising to record highs, the relative strength line for Burlington Stores stock has trended lower in the past couple of months.
Burlington Stores stock is the second-ranked stock in IBD's Retail- Apparel/Shoes/Accessories group, according to IBD's Stock Checkup tool.
RH stock jumped into buy range after breaking out of cup base with a 157.81 entry point on Sept. 11.
Soon after the breakout, RH formed a three-weeks-tight pattern, offering a 175.39 entry. A three-weeks-tight pattern requires that a stock finishes no more than 1.5% above or below the prior week's close for two consecutive weeks. That makes three weeks of tight closes that can be viewed on a weekly chart.
Usually, a three-weeks-tight is a chance for existing holders to add a few more shares. But in RH stock's case, the tight action came just above the prior buy zone, so it was an opportunity to start a new position.
RH stock rose to a peak of 192 on Oct. 28, then began pulling back. It's been finding support at the 50-day line and right around that three-weeks-tight entry.
A strong rebound from the 50-day/10-week line, preferably in higher volume, would offer a buying opportunity for RH stock. The first or second pullback to the 10-week line following a breakout can be actionable.
The upscale hardware store chain underwent a revamp in recent years, changing its name from Restoration Hardware to RH. In the face of online competition, RH doubled down on brick-and-mortar, building huge, upscale showrooms, raising prices and promoting a membership program.
The company is the top-ranked stock in IBD's Retail-Home Furnishings group and is also on the IBD 50 list.
The membership discounter climbed into buy range out of a cup-with-handle base on Thursday after clearing a 304.98 entry point. But Costco stock dipped to 302.62 on Friday. Costco stock has found support at its 50-day/10-week line multiple times this year.
Late Wednesday, Costco reported a 4.2% increase in September same-store sales. The company is ranked No. 2 in IBD's Retail-Major Discount Chains group.
A big driver for Costco stock has been the enthusiastic reaction to the warehouse chain's first store in China, with huge crowds and lines at the Shanghai site. That opening triggered a late August breakout from a prior base.
The big-box discounter broke out of a first-stage cup-with-handle base on Aug. 30 with a 115.03 entry point. Since then, shares have continued to hold in the 5% chase zone, which runs to 120.78. Walmart stock rebounded from its 50-day line earlier this week.
Walmart stock also has a three-weeks tight pattern with a 120.81 entry, just pennies above the current buy zone. It's possible the three-weeks-tight will end up as a flat base.
But Walmart has a weak Composite Rating and a dismal 48 EPS Rating. The huge Dow Jones retail giant struggles to grow EPS and sales, even as analysts hail its digital efforts. Walmart earnings for the third quarter are due early Thursday.
The RS line for WMT stock is just under multiyear highs. But the RS line has been moving sideways for several years.
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