Can LOW Avoid New Lows?

The Russell 2000, an index of smaller cap stocks, has clearly entered bear market territory. But the S&P 500 and the NASDAQ Composite, the two indexes of mainstream stocks, have fallen to the double bottoms formed in late August/September. If they find support at those levels, seasonal patterns suggest these indexes could rally nicely as we get further into earnings season.

In looking for sectors to watch, I noticed RTH, the Market Vectors Retail ETF, has a pretty good track record over the next several months. Retail stocks have a history of coming out of the Q4 earnings gate strongly.

RTH has found previous support around the 72 level, and is retesting that support. If it holds, and the rest of the market starts showing a return of buyers, this sector could be a good place to find rebound trade candidates.

I looked up the top-10 holdings of RTH and went through the charts and seasonal patterns of each. The first six largest holdings, AMZN, HD, WMT, CVS, WBA, and COST, didn't stand out. I was looking for a chart setup that could be tradable if the overall markets at least stabilize, evidence of accumulation while the rest of the market is declining, and a seasonal pattern suggesting institutions regularly load up on the stock this time of year.

Number 7 on the list caught my attention. Lowe's Companies (LOW), the home improvement retailer, actually shows a little accumulation. Investor's Business Daily's Up/Down Volume Ratio, at 1.1, the On Balance Volume (OBV) indicator, and a look at volume patterns show some evidence of accumulation , while most other stocks are showing evidence of distribution.

And while many other stocks are breaking support levels, LOW rebounded strongly from the 70 level in mid-November, and yesterday's early-session selloff quickly attracted buyers, leaving the stock to close back at the 70 level. LOW will be interesting to watch to see if it holds, and begins to rebound from the 70 level.

Checking fundamentals, Lowe's Companies has a pretty decent track record of growth and earnings (an EPS Growth rate of 17%) over the past two years. Return on Equity (ROE) is a nice 25%.

The company pays a dividend, currently yielding 1.6%. However, the stock has a 5-year dividend growth rate of 20.7%. Lowe's has increased their dividend for 54 consecutive years (since the construction of the Berlin Wall and Alan B. Shepard's flight, the first US astronaut to enter space).

So LOW could be of interest to a short-term trader looking for a potential rebound trade, or a longer-term investor looking for a good DRIP (dividend reinvestment) holding. But first, the markets must show a better attitude. For that reason, I will not add LOW to the Seasonal Forecaster portfolio at this time, but I will be closely watching this stock.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

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Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

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MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.


This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.


The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.


The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.