3 Retail Stocks Ducking the Downturn

Retailers J C Penney Company Inc (NYSE:JCP), Kohl's Corporation (NYSE:KSS), and Gap Inc (NYSE:GPS) are beating the broader market today

by Josh Selway

Published on Jan 7, 2016 at 2:14 PM

Retail stocks are outperforming the market today, despite a lowered earnings outlook from Macy's, Inc. (NYSE:M). Below, we'll take a closer look at J C Penney Company Inc (NYSE:JCP)Kohl's Corporation (NYSE:KSS), and Gap Inc (NYSE:GPS)​, which are all bucking the broad-market sell-off

We'll start with JCP, since it appears to be leading the sector higher. Specifically, the company reported promising comparable store sales for the holiday season. The stock is up 2.9% today at $7.20, but may be seeing resistance in the form of its 30-day moving average, a trendline it hasn't conquered on a closing basis since Oct. 22. 

J C Penney Company Inc short sellers can't feel good about today's report. Almost 36% of the stock's float is sold short, and it would take traders almost two weeks to buy back their short positions, at average daily volumes. Combine this with the fact that 63% of analysts rate JCP a "hold" or "strong sell," and it appears the stock has the contrarian fuel to spark a short-term rally. 

KSS has picked up 1.9% today at $50.99, on pace for its best close since Sept. 16. The shares have outperformed recently, beating out the S&P 500 Index (SPX) by close to 19 percentage points over the past two months. 

While analyst ratings are of a split opinion, option traders have a clear bullish preference. For instance, 2.30 Kohl's Corporation calls have been bought to open for every put during the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). 

GPS has dropped almost 39% over the past 12 months, so today's pop is surely appreciated by shareholders. The stock was last seen 4.1% higher at $26.33, but is having issues fighting through its 50-day moving average, which has been a nuisance on the charts since last summer. 

Option traders are hoping the stock can break through the resistance and extend today's rally. GPS' 10-day call/put volume ratio at the ISE, CBOE, and PHLX of 1.16 is higher three-fourths of comparable readings from the past 12 months.

And Gap Inc could rally further, if shorts start to flee. The stock's short-interest ratio stands at 6.00, meaning it'd take bears over a week to buy back their shares, at average daily volumes. This is something to keep in mind with the company scheduled to report December same-store sales after today's close -- an event that didn't go too well last month

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