Todays Big Stock: Buckle, Inc. (The) Common Stock (NYSE: BKE)

As you know, the market has had a relatively rough go of it over the past couple of weeks. Most, if not all, stocks have broken key levels and moved significantly lower. However, sell-offs generally don’t last forever. The odds seem to favor that we are getting closer to at least a short-term bounce rather than towards another 7-10 days of selling, although anything is possible in the stock market. In preparation for a potential rally, I believe that now would be a good time to start searching for stocks that may be approaching lower levels of support. One such stock that seems to fit that description would be that of Buckle, Inc.

The Buckle, Inc. is a retailer of casual apparel, footwear, and accessories for both men and women. Buckle currently operates around 420 retail stores in 41 states throughout the continental U.S. under the names Buckle and The Buckle. Buckle offers denims from brands such as Big Star, Big Star Vintage, Miss Me, MEK, Rock Revival, Silver Jeans and Buffalo Jeans. Other brands include Hurley, Billabong, Affliction, Sinful, Archaic, Obey, Roar, RVCA, Fox, and Fossil. The Buckle, Inc. purchases products from manufacturers within the United States, as well as from agents who source goods from foreign manufacturers.

To review Buckle’s stock, please take a look at the 1-year chart of BKE (Buckle, Inc.) below with my added notations:

As you can see, BKE has continued to trend higher throughout most of the last year, which is somewhat of a bonus compared to most other stocks. In addition, BKE has created important price levels at $40 (d. green) and $35 (l. green) over the last 8 months. Since BKE has been moving lower along with the overall market, the level of $40 is now coming back into play. This $40 level should act as formidable support as it did back in May and June. However, if BKE were to break below the $40, the $35 level would be the next potential level of support.

The Tale of the Tape: BKE has maintained a decent trend higher throughout the market’s recent struggles. BKE has also formed common areas of support and/or resistance levels at $40 and $35. The trades here are simple: If BKE continues to pullback to the expected $40 support, a long position could be entered with a stop loss set under below $40. If BKE were instead to break below $40, one might enter a short position with a stop set above $40, expecting of a drop down to the level of $35. If BKE gets to $35, a new long position could be entered.

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