Retail Rallying

The retail sector is today's sector of the day, and the rally came just in time.

Retail Index Daily Chart

Friday's decline plunged the Retail Index (RLX.X) below the 50- dma and 878, which was not only the 38.2% retracement bracket, but also the neckline of a head and shoulders top. Based on the height of the pattern, the downside target should be 818 (938- 878=60, 878-60=818). RLX is trying to change all of that, up 2.28% today. That places the index back above 878 and the 50- dma, but will it be able to stay there?

Wal-Mart Stores Daily Chart

If the Retail Index is going to reject its head and shoulders top, it is going to need the help of retail behemoth Wal-Mart (NYSE:WMT). Wal-Mart had been finding support at the psychological $50 level, but lost that support level on Friday. WMT did manage to find support at $48.07, the 61.8% retracement bracket, but $50 should offer as much resistance on the way back up as it did support on the way down. The daily chart reveals a big symmetrical triangle that is forming, and should tell the fate of WMT and the retail index.

Wild Oats Point and Figure Chart

One stock that probably won't move the Retail Index is Wild Oats Markets (NASD:OATS), which operates 109 natural foods supermarkets. Nevertheless, OATS has broken out of a bullish triangle on its point and figure chart, and has also penetrated the bearish resistance line. Recently stocks of all shapes and sizes have had trouble holding above this line, so it will be interesting how Wild Oats holds up over the coming days.

Jeff Canavan