Sector Analysis: Discount Variety Stores

As many of you know, I usually spend Sunday evening analyzing sectors and the hot stocks within those groups. Due to time constraints I’ve been skipping this watchlist ritual, instead only trading stocks that I find through my scans.

I had some free time today and was surprised to see Discount Variety Stores among the top of “sectors making 52 week highs” list. I should not have missed this and will go back to my Sunday ritual this weekend. Now lets look at Discount Variety Stores:

The sector action looks great. Price is pulling back from all time highs in an orderly fashion. The moving averages are all moving up and, not seen on this chart, volume is confirming the trend.

There are twelve stocks in this group, and nine are within 70 percent of their 52 week highs. Here are my favorites:

BJ: Stick with the trend and buy pullbacks

COST: It’s dropped below the 50 day moving average, so I would not buy here. However, a dip to the 200 day MA would provide a low risk entry. I haven’t shown it here, but Costco has been an excellent deep pullback play since 2004.

BIG: Watch for a pullback to the 30 breakout level.

WMT: Already pulled back to support. Low risk entry with good volume pattern.

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