Trading Nation

These disappointing stocks could be bouncing back

Retail staging a comeback?

As the retail sector gained Monday, one group of suffering stocks led the way, jumping 1.2 percent.

The multiline retail stock group, which includes names such as Target, Dollar Tree and Nordstrom, has fallen 5 percent year to date despite Monday's bounce. While the retail sector as a whole has been boosted by outperforming Internet companies, such as Netflix and Amazon, brick-and-mortar stores have struggled to stay competitive.

Read More The tale of the two kinds of retailers

However, Andrew Burkly of Oppenheimer said multiline retail as a group has the strongest correlation to weak oil prices.

The average national gas price recently fell to $2.29 from $2.33 a week ago, according to AAA's Daily Fuel Gauge, which should theoretically translate into more available funds for consumer discretionary spending.

"As gas prices stay low ... I think that's a good tail wind for the consumer and for this group," Burkly said Monday on CNBC's "Trading Nation."

Burkly said he sees more potential in growth for traditional department stores such as Target, rather than dollar stores. Target closed up more than 2 percent Monday.

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Barron's wrote over the weekend that Dollar Tree should be expected to outperform compared to market estimates, based on long-term gains from its acquisition of discount competitor Family Dollar. The company's stock rose 1.8 percent on Monday.

More generally, technical analyst Craig Johnson of Piper Jaffray said the retail sector is positioned to perform well into the next year. The retail sector ETF, XRT, has been on an uptrend since 2013 and is moving higher off a key level of support at about $45, he said.

"it looks like it's at an interesting inflection point where it's about to turn higher," Johnson said Monday on "Trading Nation."

Specific industries within retail that Johnson is watching include auto parts, housing, restaurants and athleticwear.

"I like what I see happening in the retail space," Johnson said. "Back-to-school numbers were good, it seems like the consumer is coming back and we're probably setting ourselves up for a pretty good holiday season."

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