Over 100 S&P stocks just hit new highs, but these two could have more room to run, trader says

It’s been a noteworthy week for the S&P 500.

More than 110 S&P stocks including Costco, Tesla and Advanced Micro Devices on Thursday hit new highs along with the broader index. The S&P continued to climb Friday, its seventh straight day of gains.

Of those record makers, several in the retail sector look like they’re just getting started, JC O’Hara, chief market technician at MKM Partners, told CNBC’s “Trading Nation” on Thursday.

“We really like the pattern of consolidation followed by breakouts and that’s exactly what you’re seeing in retail,” he said, pointing to a chart of the SPDR S&P Retail ETF (XRT).

No longer “dead money,” the XRT has shaken off its overbought condition with the recent breakout, which could stretch to some other names in the group, O’Hara said.

“Two of our favorite retail names that have shown consolidation and are breaking out this week are Bath & Body Works and Tractor Supply,” he said, adding that both have room to run to the upside. His target for Tractor Supply was $240 a share, 10% upside from current levels.

Another under-the-radar catalyst could help boost retail into the close of the year, O’Hara said.

“Conditions are prime to see a melt-up into year-end,” he said, predicting anywhere from a 4%-7% rise for the S&P.

That could spark short covering, or when short sellers have to buy shares of a stock to close a failed short position, in the heavily bet against retail space, O’Hara said.

“That’s also why we like retail, because we think there’s going to be a melt-up, which means short-covering rallies,” he said.

After the S&P’s 62nd new high of the year, Sanctuary Wealth’s Jeff Kilburg also expected stocks to grind higher through the end of 2021.

“We’re at historical highs on some of these specific names but we’re not at historical highs across the board on valuations,” Kilburg, his firm’s chief investment officer, said in the same interview.

Within retail, Kilburg warned on a name outside of the new-high club.

“I worry about Under Armour,” he said, adding it has underperformed rival Nike on a relative basis by 125% in the last three years.

“If it did not do well and prevail when people were at home pressing their iPhones buying products, how is it going to do well now?”

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