The backstory: It’s Black Friday again, a time when retail stocks could generate high revenues and earnings ahead of the holiday season. However, with Amazon.com (AMZN) and online retailers taking market share from brick-and-mortar retailers, stocks in the space could suffer during the busiest shopping time of the year.

If you’re thinking that brick-and-mortar retailers won’t meet expectations, and online retailers will outpace traditional retailers, keep an eye on the ProShares Decline of the Retail Store ETF (EMTY) and the ProShares Long Online/Short Stores ETF (CLIX).

What to know: EMTY is designed to benefit from a fall in brick-and-mortar retailers. With the convenience of e-commerce, online retailers are threatening to shift consumer habits, making many elements of physical shopping irrelevant. EMTY aims to provide the inverse of one times the daily return of the Solactive-ProShares Bricks-and-Mortar Retail Store Index. Since EMTY is an inverse ETF and only aims to provide returns corresponding to -1x its benchmark index, traders and investors need to be careful holding this ETF for periods longer than a day due to the compounding of daily returns.

CLIX aims for investment results corresponding to the performance of the ProShares Long Online/Short Stores Index. Again, with e-commerce sales growing at a fast pace and thwarting in-store retail, there is immense growth potential in the online retailers space. On the other hand physical retailers are under pressure, with revenues and earnings declining significantly.

How I’m playing it: If fewer consumers are working the Black Friday sales, these ETFs could see a strong rise. Additionally, if investors and traders start rotating from bricks and mortar stocks to e-commerce stocks, like AMZN and Alibaba (BABA), both CLIX and EMTY should benefit. However, I’m not jumping the gun ahead; I’ll wait for Black Friday results and look for a negative catalyst for traditional retailers before hopping in.


Petra Hess runs PPetraPicks.com. She is a technical swing trader and long-term investor in domestic and Canadian stocks and ETFs. At the time this article was published on RagingBull.com, she had no ahares, options or open orders in CLIX, EMTY, AMZN or BABA.

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