Todays Big Stock: Guess? (NYSE: GES)

Guess? Inc. designs, markets, distributes, licenses apparel and accessories for men, women and children. The company’s apparel is marketed under numerous trademarks including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, GUESS? and Triangle Design, MARCIANO, Question Mark and Triangle Design, a stylized G and a stylized M, GUESS Kids, Baby GUESS, YES, G by GUESS and GUESS by MARCIANO.

Guess? Inc. lines include full collections of clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets, knitwear and intimate apparel. It also grant licenses to manufacture and distribute a range of products that complement its apparel lines, including eyewear, watches, handbags, footwear, kids’ and infants’ apparel, leather apparel, swimwear, fragrance, jewelry and other fashion accessories. The Company operates in North American, Europe and Asia.

Below is a 1-year chart of GES (Guess? Inc.).  Please review the chart with all of my added notations:

GES has been holding a very important level of support at $38 (green) since the end of last year. No matter what the market has or has not done this year, GES has not broken below $38 . . . until this week.  Something seems to have changed with GES since it has always held $38, but then that level broke. The fact that the stock seemed to be losing steam on each rally (red) was probably a heads up that the stock might be preparing for a break down. Stocks that break significant support tend to move lower, which is what I’d expect from GES.

The Tale of the Tape: GES had a very important support level at $38 throughout the entire year. This week the stock broke below that $38 level, thus it should be moving lower. A short position could be entered now with a stop above $38, or a lower risk entry would be on a rally back up to $38, if that were to happen. A break back above $38 might negate the forecast for a lower move.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT