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Retail gets wrecked, but two stocks could see revival

Retail gets wrecked, but two stocks could see revival

Retail was sent to the bargain bin this quarter.

Foot Locker, Nordstrom and Macy's are sharply lower over the past three months, while Gap is likely to close out its worst quarter since 2001 and Kohl's its worst ever.

"Overall the group looks very, very poor so on a longer-term basis, you still want to avoid them," Matt Maley, equity strategist at Miller Tabak, said on CNBC's "Trading Nation" on Thursday. "But there could be some countertrend bounces here in the near term."

Nordstrom, one stock Maley says could see a bounce, has plummeted nearly 30% since the beginning of April. It has also trailed the broader market with a 2% gain this month, a third of the S&P 500's advance.

"The stock broke below its December lows back in May and that was quite negative," said Maley. "If you look at its weekly RSI chart, it's the most oversold it's been in some time, so it could or should be due for a bit of a bounce."

Its relative strength index, a measure of overbought and oversold conditions, fell as low as 16 in late May. Any reading below 30 typically signals oversold conditions.

"The other one is Kohl's," said Maley. "When that broke down earlier this year in May, it broke below the neckline of a head and shoulders pattern. That was quite negative. In fact, it fell well below. But again its weekly RSI chart is quite oversold and that one could be due for a bounce, one that could last more than a couple of days."

Quint Tatro, president of Joule Financial, isn't sold on the idea that these stocks could make a comeback.

"The stocks … that are in the trash, they're in the trash for a reason. They're not innovating as well as other companies like a Walmart … or a Target. Look at these two stocks trading at all-time highs," Tatro said during the same segment. "Are they overvalued? [22.5] times forward earnings for Walmart is rich but it's taking a higher valuation because it's innovating, it's going online and it's seeing progress."

Tatro says Walmart's multiple will come down and become more attractive in time as earnings rise. Its 22.5 times forward earnings multiple is far higher than the 15 times multiple on the XRT retail ETF.