#$gnc

By Mark Melin

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The fight over a minimum wage hike currently being waged across the U.S. will create winners and lowers as well as a potential relative value trade.

Pro case here->  Higher Wages For The Workers Helps Entire Economy

Con case here->  Puerto Rico's Economy Hurt By Minimum Wage?

A Goldman Sachs report notes that, with interest in the issue building, there is a formula to determine what stocks might benefit from a boost in the minimum wage. 

Even before a federally mandated minimum wage, wages are rising around the world

As if perhaps identifying a strong and persistent trend, Goldman equity analysts Matthew Fassler, Stephen Tanal, Karen Holthouse, Taposh Bari and Lindsay Crucker Mann note wages are going up around the country currently even without a $15 per hour Federal minimum wage mandate.

Bellwether states California and New York were the first to implement a $15 minimum wage with other states – and the Federal government – expected to follow.

Hardest hit by this action will be retail and restaurant stocks, but depending on the current wage rate and the customer income, the impact between various single name issues could vary widely.

Stocks best positioned include those whose customers will benefit from a minimum wage hike includes McDonalds

Best positioned to handle the coming minimum wage hike mandate are stocks such as Advance Auto Parts, whose customer base is a middle class to lower income do-it-yourself car repair demographic. This group will likely have more money to spend after a rate hike.

Further, companies where the cost differential on their current wages is likely to be muted will experience less difficulty relative to companies that must raise from the current $7.50 per hour mandate.

The same is true to various degrees for Best Buy, Office Depot, which the report said such firms “are likely to grapple with wage inflation, each should see an offset in sales as their customers benefit from rising wages.” One company that pays low wages, McDonald’s, will be positively impacted because their customers are likely to see a wage hike as a result of higher minimum standards.

Firms where the customer doesn’t benefit from a minimum wage hike

The companies most impacted by a minimum wage hikes are those that pay relatively low wages but relatively and serve relatively higher-income customers who stand to gain less from wage rate inflation, the Goldman report noted.

This list might include Dicks Sporting Goods, whose stock fell from a near-term high on May 2 of $47.89 and is currently trading one month later at $43.24. GNC Holdings, the Pittsburgh-based company that sells nutritional products, along with Tractor Supply Company are likely to be mostly negatively impacted.

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5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers

Dominion Resources, Ticker: $D

Dominion Resources, $D, is the first utility to make the Top 10 in a long time. Many have broken out, but this one is rising and at a critical point for a trade. It is filling the gap from November and breaking the 200 day SMA. The RSI is rising and in the bullish zone while the MACD is also rising. Look for a break above the gap level to participate.

Edwards Lifesciences, Ticker: $EW

Edwards Lifesciences, $EW, made a top in late November and has been pulling back since. Friday it accelerated lower and that move brought the RSI down into the bearish zone. The MACD continues to fall as well. With the 100 day SMA just below, look for a break below it to follow to the downside.

GNC, Ticker: $GNC

GNC, $GNC, made a top in August as it pushed out of consolidation, but then failed and trended lower. There was a strong selling spike down in October upon release of their earnings report and then again in November on news of a Federal Enforcement Action. But since then it has consolidated and is now slowly turning higher. Friday brought it to the November high with the Bollinger Bands® opening. The RSI is rising and on the edge of the bullish zone with the MACD also rising. Look for a push over the November high to participate to the upside.

PPG Industries, Ticker: $PPG

PPG Industries, $PPG, had a solid bounce off of the bottom made at the start of October. But that move sputtered as it pushed over 100 and it has now been falling against trend support. The RSI is falling and bearish and the MACD is falling too. Look for a push under support to accelerate the move lower.

UnitedHealth Group, Ticker: $UNH

UnitedHealth Group, $UNH, has built a yearlong consolidation over support after a strong move higher. Heading into the week it is testing that support again, with the RSI in the bearish zone and the MACD falling. Look for a break of support to enter on the short side. The consolidation has the look of a rounding top and that could mean there is major downside opportunity.

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which, the worst first week of the New Year ever. Now heading into January options expiration there really does not look to be any relief in sight for the equity markets.

Elsewhere look for Gold to continue the bounce higher in its downtrend while Crude Oil burns lower. The US Dollar Index looks to continue consolidation at its highs while US Treasuries are biased higher in consolidation. The Shanghai Composite and Emerging Markets are biased to the downside and looking really ugly.

Volatility looks to remain elevated keeping the bias lower for the equity index ETF's SPY, IWM and QQQ. Their charts also point lower with perhaps a pause or oversold bounce in the short run, but with their intermediate term charts moving decidedly more bearish. The one possible exception is the QQQ which remains somewhat above the August lows. Use this information as you prepare for the coming week and trad'em well.

There's a nice combination of fundamentals and technicals setting up in GNC.

Last month the company reported pretty good earnings, with revenue and earnings beating expectations. 

In response to this, investors piled into the stock as it ran from the mid 40's all the way up to 49.

And for the past two weeks, the stock has been dormant.

This setup is a combination of post earnings announcement drift (PEAD) and a bull flag continuation pattern.

If the stock can get back above 49 and hold that level, it will mean a new wave of buyers will be ready to get into the stock again.

The first upside target is 52.50 which is a gap fill from February of last year.