Retail stocks just broke a historic losing streak — here's how experts are playing them now

Retail stocks jumped on Wednesday after posting eight straight days of losses, the group's longest losing streak on record. Now, one strategist is calling for bigger gains to come.

The XRT, a popular exchange-traded fund that tracks retail stocks, has plunged 14 percent in the last three months, with some of its holdings, such as Walmart, Dollar Tree and Kroger, underperforming the market in that time. The ETF plunged on Tuesday, led to the downside by L Brands and Target, after both retailers posted earnings that missed Wall Street's estimates.

Sentiment has turned too bearish on the retail space heading into the holiday season, said Matt Maley, equity strategist at Miller Tabak, and he sees further upside in the near term.

"Wage growth is picking up and gasoline prices are going down. That's a good recipe for the consumer stocks ... especially since they've come down so much recently," he wrote to CNBC in an email on Wednesday.

Michael Bapis, managing director with Vios Advisors at Rockefeller Capital Management, is among those who believe retail stocks aren't out of the woods just yet. He said Tuesday on CNBC's "Trading Nation" that brick-and-mortar stores face a high bar to impress consumers.

"I believe that there are retailers that are positioned. They need to have a super quality customer experience or something in a brand that draws people to continue to go there, otherwise you're seeing a massive shift in the industry," he said.

The XRT rose 2 percent on Wednesday and was on track for its best day of November.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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