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5 Retail Trades for Black Friday

Tickers in this article: HD ANF TGT M LTD
BALTIMORE ( Stockpickr) -- The biggest day in retail is just a few days away, and that's providing trading opportunities for investors who go looking for them this week.

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Black Friday may be a shopping smorgasbord for consumers who are determined enough shake off their tryptophan-induced comas after Turkey Day, but for retailers, it's an equally big deal. Traditionally, Black Friday got its name as the day retailers move into profitability for the year (into the black). Not surprisingly, a good sales showing on Black Friday can make or break a fourth quarter -- and it provides a reliable barometer for the strength of consumer spending.

But we're not trying to predict sales forecasts for Friday. Instead, we're focusing on the technical side of things with five retail names that look tradable before the big day.

One big takeaway should be there are lots of similar setups out there. That's not hugely surprising -- correlations are high in the retail industry, so birds of a feather tend to flock together. As you're about to see, that bodes well technically for retail as a group.

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For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

So, without further ado, let's take a look at five technical setups worth trading now.

Home Depot

First up is Home Depot (HD) , the home improvement retailer that's likely to see a run on generator deals on Black Friday, just a couple weeks after Sandy hit the East Coast. But I digress.

Right now, Home Depot is forming a textbook version of the ascending triangle pattern, a setup that's formed by a horizontal resistance level above shares and uptrending support below them. As shares of HD have bounced in between those two price levels, they've been getting squeezed closer and closer to a breakout above that $63.50 resistance level. When that breakout happens, investors have a buy signal for this stock.

The 50-day moving average has acted like a solid proxy for support over the last several months -- that makes it a logical place to put a stop loss on this trade. Remember, it's important not to be early on this trade; resistance at $63.50 has turned away shares the last three times they tried to overcome that price, so it's crucial to see resistance get taken out before jumping in.


Department store giant Macy's (M) is forming the exact same setup right now. Just like Home Depot, Macy's has a horizontal resistance level above shares right now (at $41) and an uptrending support level to the downside. So here too, we want to see a breakout above $41 before jumping on board this trade.