BALTIMORE (Stockpickr) -- Retail stocks haven't exactly been grabbing headlines lately -- at least not good ones. The retail sales numbers that most Wall Street analysts follow have been looking shaky in recent months, trending lower since this time last year. Must Read: Warren Buffett's Top 10 Dividend Stocks So you'd be forgiven for thinking that the last 12 months were a pretty rough time to be a retail investor. But you'd be wrong. As a sector, retail has quietly been racking up gains. The SPDR S&P Retail ETF is up more than 18% over the trailing 12 months. That's almost a quarter better performance than the rest of the S&P 500 index. And despite sluggish retail sales from a macro standpoint, the biggest gains could still be yet to come. That's because we're seeing bullish technical setups close to breakout mode in some of Wall Street's most prominent retail names -- and today, we're taking a closer technical look at five of them. For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution. Without further ado, let's take a look at five technical setups worth trading now. Must Read: 10 Stocks Billionaire John Paulson Loves Lowe's Up first is home improvement retailer Lowe's . Lowe's has been a stellar performer over the past year, rallying more than 46% in the last 12 months. That's about triple the return of the S&P 500 over the same stretch. And this week, Lowe's looks ready to kick off another leg higher. Lowe's is currently forming an ascending triangle pattern, a bullish price setup that's formed by horizontal resistance above shares at $70 and uptrending support to the down-side. Basically, as LOW bounces in between those two technically significant price levels, it's been getting squeezed closer and closer to a breakout above our $70 price ceiling. LOW spent most of yesterday's session about $70, if only barely. If shares can hold that line into today's session, it's a buy. Relative strength adds some extra confidence to the breakout in LOW right now. Just like this stock's price level, our relative strength line at the bottom of the chart has also been moving higher in an orderly fashion. That's our indication that Lowe's isn't just moving up -- it's also outperforming the rest of the market along the way. As long as that uptrend in relative strength remains intact, this home improvement stock should continue to outperform the S&P. Must Read: 11 Stocks Warren Buffett Loves Costco Wholesale We're seeing the exact same setup in shares of Costco Wholesale right now -- it's just not quite in breakout territory yet. Like Lowe's, Costco is forming an ascending triangle pattern, in this case with a breakout level up at $145. COST still has some distance to cover before shares make it to test the $145 level, but it's close. Why all of that significance at that $145 level? It all comes down to buyers and sellers. Price patterns like the ascending triangle are a good quick way to identify what's going on in the price action, but they're not the actual reason a stock is tradable. Instead, the "why" comes down to basic supply and demand for Costco's stock. The $145 resistance level is a price where there has been an excess of supply of shares; in other words, it's a spot where sellers have previously been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $145 so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. Wait for shares to catch a bid above $145 before you buy COST. Must Read: 10 Stocks George Soros Is Buying Foot Locker Foot Locker is another retail name that's been in rall -mode for the last year and change – since this time in 2014, FL has ratcheted more than 43% higher. More recently, though, this big athletic apparel seller has been consolidating sideways. That's not a bad thing, though. That sideways grind in FL is exactly what's making this stock tradable now… The sideways action in Foot Locker is forming a rectangle pattern, a consolidation setup formed by a pair of horizontal resistance and support levels that basically "box in" shares between $52 and $58. Consolidations such as the one in FL are common after big moves (such as the one that started in last year); they give the stock a chance to bleed off momentum as buyers and sellers figure out their next move. Rectangles are "if/then patterns": If Foot Locker breaks out through resistance at $58, then traders have a buy signal. Otherwise, if the stock violates support at $52, then the high-probability trade is a sell. Since this stock's price action leading up to the rectangle was an uptrend, it favors breaking out above $58. Must Read: 10 Stocks Carl Icahn Loves Wal-Mart You don't need to be an expert technical trader to figure out what's going on in shares of retail behemoth Wal-Mart right now. Since last fall, WMT has been bouncing its way higher in a price setup that's about as straightforward as they get. Basically, Wal-Mart has been a "buy the dips stock" in the last few months, so, as shares dip for a third time now, we're looking at a buying opportunity for Wal-Mart. Wal-Mart's trading setup is an uptrending channel, a price pattern formed by a pair of parallel trend lines that identify the high-probability range for shares of WMT to stay stuck within. In other words, every test of trend line support has provided a low-risk high-reward opportunity to be a buyer in WMT, and as shares bounce off that support line to end January, it makes sense to buy the bounce. Waiting for a bounce is important for two key reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring WMT can actually still catch a bid along that line before you put your money on shares. Must Read: 5 Stocks Warren Buffett Is Selling J.C. Penney Small-cap department store chain J.C. Penney has been the exception to the retail rally that's been pushing the other four stocks on our list higher in recent months. Since July, JCP has actually shed more than 16% as ongoing business challenges spook investors (and shoppers). But long-suffering shareholders could be in for a reprieve in 2015. That's because this stock is starting to look "bottomy" here. Penney is currently forming an inverse head and shoulders pattern, a bullish setup that indicates exhaustion among sellers. You can spot the inverse head and shoulders by looking for two swing lows that bottom out around the same level (the shoulders), separated by a bigger trough called the head; the buy signal comes on the breakout above the pattern’s “neckline” level (that's the $8 price level in JCP). Momentum, measured by 14-day RSI, is our side-indicator in JCP. RSI made higher lows at the same time that shares of Penney was making lower lows and forming its head. That's a bullish divergence that signals building buying pressure. -- Written by Jonas Elmerraji in Baltimore. Must Read: Warren Buffett's Top 10 Dividend Stocks Follow Stockpickr on Twitter and become a fan on Facebook. At the time of publication, author had no positions in the names mentioned. Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory that returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation. Follow Jonas on Twitter @JonasElmerraji
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