Discount retail stocks have done very well in recent years. However, if we look at 3 of the leaders in this segment we start seeing a concerning topping formation. This article makes the point that 3 top discount retail stocks are about to consolidate in 2019, and can be considered part of our 2019 market forecasts.
InvestingHaven’s research team analyzed 3 top discount retail stocks. Their stock chart suggests that they could have reached a saturation in their profits in 2019, and, consequently, might see a a year long of retracement and consolidation.
This article is primarily focused on chart analysis, much less on fundamental analysis.
Note that we do not recommend buying or selling any of these 3 discount retail stocks, nor do we have an preference for or against any of them. Our job is to interpret data points and project as good as we can into the future.
Moreover, it is pretty easy to confuse discount retail stocks with the general category of retail stocks. Forbes may be positive on some specific retails stocks as outlined here but discount retail stocks are still a different subset with their own dynamics.
Discount retail stocks: Ollies Bargain Outlet (symbol OLLI)
The chart of OLLI shows a potential head & shoulders formation which is currently in the making.
Should this head & shoulder effectively materialize we forecast prices to stop falling in the 65 – 67 area. They likely will rebound to the 75 – 80 area before continuing their dive to the neckline level of 67.
The bearish side: If 67 would not hold it may become really nasty for OLLI as a breakdown would bring this stock towards ~46.8. Note that this is not a forecast but rather a result of a potential future event (i.e. a breakdown below its rising channel).
Discount retail stocks: Costco Wholesale (symbol COST)
The strong rise of COST looks awesome, and set to continue. However, given the point we made in the introduction we believe we might we see a retracement and/or consolidation.
In case of a retracement we see COST falling to its first downside support zone which comes in around 155 – 182.
The bearish story kicks in once the above mentioned support area gives way to a breakdown. In such a scenario COST may fall towards ~110. Again, we are not forecasting this bearish scenario, we are indicating that it will become a high probability if and once a breakdown takes place.
Discount retail stocks: Burlingtone Store (symbol BURL)
The weekly chart of Burlington store is interesting to say the least.
Burlington’s stock price seems to be consolidating and setting a major rounding top formation right above the rising wedge. This is also quite unusual, and requires a high level of attention.
If its stock price would break down we see as a first projected downside target ~120.
The really bearish case kicks in once 120 results in a breakdown in which case the lowest support point might get hit: ~99.
A rise above 180 will lead to the bullish case, and any of the above points will become invalid.
This research is meant to educate investors on probabilities based on chart analysis. It is certainly not meant to be investment advice.