The Potential For A Major Breakout In This Retail ETF [Merrill Lynch Retail HOLDRS ETF, SPDR S&P Retail (ETF)]

sellbuyMorpheus Trading: Following through on Wednesday’s accumulation day, stocks rallied higher across the board, with a few major averages closing in on major resistance. The S&P 500 stopped just shy of the 50-day MA and prior range lows, while the Nasdaq Composite is now less than 1% below its 52-week high.

After an ugly selloff in January, retail ETFs $XRT and $RTH have spent the past the past seven months in base-building mode and have tightened considerably as of late.

$RTH has reclaimed the 10 and 40-week MAs after following through on last week’s bullish reversal candle on higher volume. $RTH is long longer a heavily traded ETF, but the chart does show the potential for a major breakout in big cap retail stocks:

$RTH follow through on bullish reversal candle

A more well rounded retail ETF is $XRT, which put in a false breakout in early July but failed to breakdown below the 40-week MA. $XRT is now back above the 40-week MA but has yet to reclaim the 10-week MA.

On the daily chart (which is not pictured below), the 10-day MA has turned up to provide support after trending lower for 20 bars in a row.

$XRT holding the 200-day MA

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