Luxury Retailers Are in Bear Market Territory

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Michael Kors Holdings Limited (KORS), Movado Group, Inc. (MOV), Ralph Lauren Corporation (RL) and Tiffany & Co. (TIF) recently beat on earnings, but shares are in bear market territory, questioning the strength of sales for Christmas. When I analyze the weekly charts and my value levels, pivots and risky levels, there appears to be upside on the horizon in what could be called a “Santa Claus Rally.”

  • Michael Kors stock closed Thursday, Dec. 6, at $42.92, down 31.8% year to date and in bear market territory at 43.5% below its 2018 high of $75.94 set on Aug. 21. The stock set its 2018 low of $41.48 on Thursday.
  • Movado stock closed Thursday, Dec. 6, at $38.57, up 19.8% year to date but in bear market territory at 28.2% below its 2018 high of $53.72 set on June 7. The stock set its 2018 low of $28.75 on Feb. 6. This luxury retailer is also in bull market territory at 37% above its low.
  • Ralph Lauren stock closed Thursday, Dec. 6, at $108.83, up 5% year to date but in bear market territory at 26.4% below its 2018 high of $147.79 set on July 31. The stock set its 2018 low of $100.09 on Feb. 9.
  • Tiffany stock closed Thursday, Dec. 6, at $88.52, down 14.8% year to date and in bear market territory at 37.5% below its 2018 high of $141.64 set on July 26. The stock set its 2018 low of $86.51 on Thursday.

We know that consumer spending for luxury items increased during the 2017 holiday season, with consumers pre-spending their tax cuts expected in 2018. Now that 2018 is nearing an end, consumers may have zipped up their wallets, worried about what their 2018 taxes may look like. Credit card debt is on the rise, even for more wealthy consumers. With the recent stock market slide, some may be worried about a drain in their 401(k) retirement funds.

Here’s how to trade these stocks based upon weekly charts and key levels.

The weekly chart for Michael Kors


Courtesy of MetaStock Xenith.

The weekly chart for Michael Kors is negative but oversold, with the stock below its five-week modified moving average of $50.66 and below its 200-week simple moving average, or its “reversion to the mean,” at $51.09. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 6.84 this week, which is well below the oversold threshold of 20.00. With a reading below 10.00, the stock has become “too cheap to ignore.” Michael Kors stock also has a favorable P/E ratio of 8.50.

Given this chart and analysis, traders should look to buy Michael Kors shares on weakness to my weekly value level of $35.72 and reduce holdings on strength to my monthly and quarterly risky levels of $58.64 and $62.97, respectively.

The weekly chart for Movado Group


Courtesy of MetaStock Xenith.

The weekly chart for Movado would become positive given a close today above its five-week modified moving average of $39.00. The stock is above its 200-week simple moving average, or “reversion to the mean,” of $29.29. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 19.36 but would remain above the oversold threshold of 20.00 on a close above $39.00.

Given this chart and analysis, investors could buy Movado shares on weakness to the 200-week simple moving average of $29.29 and reduce holdings on strength to my annual risky level of $47.22.

The weekly chart for Ralph Lauren


Courtesy of MetaStock Xenith.

The weekly chart for Ralph Lauren is negative, with the stock below its five-week modified moving average of $118.96 but above its 200-week simple moving average, or “reversion to the mean,” at $106.25, which held this week. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 21.23, down from 24.97 on Nov. 30.

Given this chart and analysis, my strategy is to buy Ralph Lauren stock on weakness to the 200-week simple moving average at $106.25, but traders should be aware that my semiannual value level lags at $69.95. Reduce holdings on strength to my monthly risky level at $138.84, but keep in mind that my annual risky level is up at $178.98.

The weekly chart for Tiffany


Courtesy of MetaStock Xenith.

The weekly chart for Tiffany is negative but oversold, with the stock below its five-week modified moving average of $103.84 and just below its 200-week simple moving average, or “reversion to the mean,” of $89.83. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 11.78, well below the oversold threshold of 20.00. If this were to slip below 10.00, the stock would become “too cheap to ignore.”

Given this chart and analysis, traders should buy Tiffany stock between its weekly value level of $87.77 and its 200-week simple moving average of $89.83. I show my semiannual pivot at $93.98 and suggest reducing holdings on strength to my annual risky level of $123.03.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.



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