Mark Newton Says There Can Still Be Winners In Retail, But Be Selective

The full economic and psychological impact of the coronavirus pandemic has yet to be felt across the U.S., but it is evident fewer people will be going out to buy discretionary items, Danielle Shay of Simpler Trading said on a recent CNBC "Trading Nation" segment. 

Shay Says To Avoid Canada Goose, Other Discretionary Retail

Over a short-term period, investors may want to focus on investor staple names, such as Walmart Inc WMT and Costco Wholesale Corporation COST, Shay said.

Discretionary names like Canada Goose Holdings Inc GOOS should be avoided, as "nobody is going to be going out" to buy $1,000 winter jackets, she said. 

The retail segment as a whole will likely remain under pressure over the medium-term, and this is evident by looking at a multiyear long chart of the retail ETF, the SPDR S&P Retail XRT, Mark Newton of Newton Advisors also said on "Trading Nation."

Specifically, the chart shows multiple instances of support around $37.50 going back at least five years. But it broke below the support level and fell below $30 on Monday.

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More Pressure On Retail In 'Weeks And Months To Come' 

Investors need to be selective with what retail names they buy, especially those that have already rallied 30% or more from their lows, such as Ulta Beauty Inc ULTA, Newton said.

The retail group should continue seeing pressure over the "weeks and months to come," he said. 

Finally, winners within the retail sector will depend on who can survive staying closed the longest, Shay said. Over a 30- to 60-day timeframe, investors can trade several retail names through buying puts, she said. 

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