As with last week, the market is still having a pretty rough go of it to start this week. Most, if not all, stocks are continuing to break lower. Like any other sell-off though, it won’t last forever. The lower we go the more likely that we are getting closer to at least a short-term bounce rather than towards another week or two 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. Even better might be a stock that has held an up trend. One such stock that seems to fit that description would be that of VF Corp.
V.F. Corporation (VF) is a global apparel company based in the United States that designs and manufactures a variety of apparel and footwear for all ages. VF owns a portfolio of brands in the jeanswear, outerwear, packs, footwear, sportswear, travel gear, backpacks & technical outdoor equipment, and occupational apparel categories. These products are marketed to consumers shopping in specialty stores, upscale and traditional department stores, national chains and mass merchants. Products are marketed primarily under VF-owned brand names, but VF’s business segments include Outdoor & Action Sports, Jeanswear, Imagewear, Sportswear and Contemporary Brands.
To review VF Corp’s stock, please take a look at the 1-year chart of VFC (VF Corp) below with my added notations:
VFC has continued to trend higher throughout most of the last year, which is a bonus when compared to most other stocks, and the stock has usually demonstrated important price levels at each increment of $10. Most recently, VFC has a potential area of support at $110 (green) and a resistance level at $120 (red). You can also see how early in the year VFC had levels of importance at other aforementioned increments of $10 (purple) as well. Since VFC has been moving lower along with the overall market, the level of $110 is now coming back into play and should try to hold as support. However, if VFC were to break below the $110, the $100 level would be the next potential level of support.
The Tale of the Tape: VFC has maintained a decent trend higher throughout the market’s recent struggles. VFC has also formed common areas of support and/or resistance at each increment of $10, most recently at $110 and $120. If VFC continues to pullback to the expected $110 support, a long position could be entered with a stop loss set below $110. If BKE were instead to break below $110, one might enter a short position with a stop set above $110, expecting of a drop down to the level of $100. If VFC gets to $100, 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!
Christian Tharp, CMT