Retail Weakness Setting Sears Up for Another 36% Drop

Sears (SHLD – NASDAQ)

Tuesday, July 16, 2013

Yesterday we heard that June U.S. retail sales came in well below estimates, with overall sales rising a mere 0.4%. And if you strip away auto sales that are benefiting from a rush to beat rising loan rates, that figure drops to a minuscule 0.1%.

Wall Street loved the news, as it assures that the Fed will not be tapering anytime soon. But the retail sector itself might not care for it quite so much.

This whole storyline rang a bell for us. Back in May, we noted that Sears (SHLD – NASDAQ) was rising on similar Fed-based optimism. We predicted that SHLD would tumble to $37.75, and suggested that traders short SHLD ASAP.

So far, our prediction has come in dead on. Our previous prediction marked SHLD’s top, and the stock is currently trading for $44.05.

But now we see an even-worse signal brewing for this retailer…

SHLD 071513

Bottarelli Research Tip: SHLD is well into the right shoulder of a Head & Shoulders sell signal.Using a Head at $68.77 and a Neckline at $39.68, we calculate an eventual target of $29.09 for SHLD, making for a net loss of -36% from current prices.

More Green Mountain News: News is crossing the wire that GMCR is filing for a new trademark name for a carbonated machine – which is being viewed as possible challenger for SodaStream (SODA – NASDAQ). If true, this will be big news for GMCR and it’ll send the shorts running for cover. To play GMCR alongside other Bottarelli Research clients, join today for a 50% discount.

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