2 Telling Black Friday Charts

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Nov 27th, 2012 | By | Category: Featured, Trend Playbook, Trends

In the 1990s, tales of the Internet’s commercial potential helped fuel one of the largest bull markets the world has ever witnessed.

Sparked by the personal computer revolution that began a decade earlier, online connectivity helped open our collective eyes to new, efficient ways to conduct business. Even in an era before smartphones and ubiquitous Wi-Fi connections, we dreamed that a vast online marketplace was just around the corner.

But massive industry shifts like this take time. So when a brave new e-world didn’t materialize overnight, investors started to worry. That worry turned into selling. Then panic. You know the rest…

Now, more than a decade since the dot-com bubble burst, the fortunes of e-commerce couldn’t be brighter.

Yet no one’s paying attention.

With the financial media (and most investors, for that matter) intently focused on fiscal cliff doomsday scenarios, powerful trends are accelerating the decline of traditional retailers and propelling their online counterparts to new heights.

Consider the newly released Black Friday numbers. News headlines proclaimed record shoppers hit stores for steep discounts over the long weekend.

As The Associated Press explains:

“All told, a record 247 million shoppers visited stores and websites over the four-day weekend starting on Thanksgiving, up 9.2% of last year, according to a survey of 4,000 shoppers that was conducted by research firm BIGinsight…”

Spending was up over the weekend too. According to the BIGinsight numbers, the average shopper spent $423 over the entire weekend, compared with just $398 last year. Total spending came in at $59.1 billion. That’s a 12.8% increase compared with last year.

But the real kicker is the online sales numbers. Check that AP quote again. The record shoppers it references aren’t just the tent people who camped out in in the local Target parking lot. That’s right — online shoppers are now baked into the Black Friday pie. And the number of people staying home and shopping online for deals is growing at breakneck speed.

Black Friday online sales topped $1 billion this year for the first time — a 26% increase compared with 2011. Thanksgiving Day sales were also impressive, rising massive 32% year over year, according to comScore.

These numbers tell me one thing: Big, traditional retail stores better watch their backs. They need to solidify their respective niches or risk becoming victims of a now-thriving web-based marketplace.

Unfortunately for most big-box stores, there’s really not much to set them apart from their online competition.

I’m sure you’ve seen this play out before. After all, your local big-box bookstore and record shop closed years ago, didn’t they? Online retailers have their sights set higher now. And they’re winning the war.

The charts tell the whole story…

Best Buy Co. Inc. (NYSE:BBY), the formerly dominant face of the electronics sector, is the perfect example of how quickly these brick-and-mortar business models can crumble:

Consumers joke that Best Buy and other big retail stores have become showrooms for Amazon.com and its online retailer brethren. But I doubt management sees recent sales numbers as anything but a disaster. With free shipping options and the best possible prices, there’s little reason to waste gasoline and time at the store — unless you’re buying something that requires professional installation.

Now, after an ugly third quarter, Best Buy’s CEO appears to be more willing to negotiate a bid to take the company private. In just a few short months, you might not ever have to look at its ugly chart again. Grab this falling knife at your own risk…

While traditional retailers continue to lose customers, innovative web businesses are there to scoop them up.

Take everyone’s favorite online auction platform, eBay Inc. (NASDAQ:EBAY). I’ll let the chart do the talking:

No, this is not an inverted copy of the Best Buy chart. But it is the same timeframe as our first example. The main difference here is that eBay is flirting close to new multiyear highs this afternoon. And while the stock does have momentum at its back this year, it’s not just a story stock anymore. The company’s fundamentals and growth prospects couldn’t be better…

Of course, today’s two charts are just a small illustration of a much larger trend that’s unfolding in the retail world. It’s been a long wait for online retailers — but now’s their time to shine. In the coming weeks and months, alert traders should have plenty of opportunities to book gains on the long and short sides.

Sincerely,

Greg Guenthner, CMT

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Greg Guenthner

Greg Guenthner, CMT, is the co-editor of STORM Signals and Penny Stock Fortunes. He is also the editor of Agora Financial’s Trend Playbook, a free resource for trend followers and technical traders. For close to a decade, Greg has led Agora Financial’s small-cap division, where he founded one of one of the only independent OTC research advisories in the industry. Greg specializes is classical trading techniques and combines timing strategies with his fundamental analysis of small-cap stocks.

He is a member of the Market Technicians Association and hold the Chartered Market Technician designation. 

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