How Has Trading Sentiment Changed In The Retail Sector Ahead Of Black Friday?

The holiday shopping season, Black Friday and Cyber Monday in particular, is the most important time of year for U.S. retailers. Sentiment data from StockTwits could provide traders with some unique insight into market expectations for Black Friday 2019.

Unfortunately, retail stocks are coming off a mixed third-quarter earnings season heading into the critical week of shopping. The SPDR S&P Retail XRT is up just 1% overall in the past month heading into Black Friday, and a handful of retailers that reported strong third-quarter earnings have been contributing a disproportionately large part of those gains.

Retailers that took a huge earnings hit, such as Dollar Tree, Inc. DLTR, Kohl's Corporation KSS and Foot Locker, Inc. FL, are the hoping holiday shopping surge can get their sales and share prices back on track.

StockTwits Sentiment

Despite a big earnings hit, Foot Locker bullish StockTwits message sentiment has been steadily rising in the past week, climbing from just 14.8% on Nov. 20 to 40.3% on Tuesday.

That same bullish sentiment trend has impacted other retailers from Nov. 20 to Nov. 26 as well.

• Kohl’s bullish sentiment increased from 31.7% to 50%.
• Nordstrom, Inc. JWN bullish sentiment increased from 60.9% to 69.5%.
• Dollar General Corp. DG bullish sentiment increased from 87.5% to 92.3%.

However, investors have also gotten less bullish on several retailers in the week heading into Black Friday:

• Dollar Tree bullish sentiment dropped from 82.3% to 79.5%.
• Target Corporation TGT bullish sentiment dropped from 87.1% to 75.6%.
• Macy's Inc M bullish sentiment dropped from 51.4% to 46.3%.
• Walmart Inc WMT bullish sentiment dropped from 80.2% to 78.2%.

Overall sentiment in the retail sector has been on the rise ahead of the biggest shopping week of the year. In the past week, bullish sentiment for the XRT ETF has increased from 38.5% to 44.4%, while bullish sentiment in messages containing the phrase “Black Friday” has risen from 82.6% to 84%.

Benzinga’s Take

Investor sentiment can be a tricky metric to trade due to its contrarian nature. While it may seem like good news that the market is getting more bullish on retailers, bullish investor sentiment is typically seen as a bearish signal for share prices.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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