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Retailers Get Taken To School

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Retailers reported a mixed bag of same store sales for the back to school season. Discounters like Wal-Mart (WMT) and Target (TGT) posted increases, and specialty retailers like Gap (GPS) and Abercrombie and Fitch (ANF) continue to see sales drop off. Sales of retail stock did however pick up in August.

Retail Index Daily Chart

The Retail Index (RLX.X) peaked on July 31st, and prices have been slashed ever since. In the month of August RLX took out the 50 and 200-day moving average, as well as the 10-month up trend. The index tried to consolidate around the July low, but finally cracked today. 787 might be the next support level, but the Retail Index looks like it's forming a big triple top.

Wal-Mart Daily Chart

Wal-Mart reported an increase in same store sales of 7% in August, but the price of Wal-Mart stock was marked down $9 during that period. With retracements, moving averages, and up trends broken, WMT is relying on July 6th low of $46.71 for support.

Target Daily Chart

Target has been the target of selling today, and is getting close to testing support at $32.50. A drop below that level would complete Target's own triple top. The height of the pattern is $7, so if we subtract that from the pattern low of $33, we get an approximate downside target of $26, close to the 12/20/01 low.

Jeffrey Canavan
Assistant Analyst
Premier Investor

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