Today’s Big Stock: Pier 1 Imports, Inc. (NYSE: PIR)

Most of the price levels highlighted in Today’s Big Stock are of the horizontal variety. They’re easy to identify and easy to trade off of. However, from time to time I also like to discuss important levels that are somewhat of a “moving target” in the form of up or down trendlines. One such stock forming an up trendline is that of Pier 1 Imports, Inc.

Pier 1 Imports, Inc. is a specialty retailer of imported decorative home furnishings and gifts. The specialty retail operations of the company consist of retail stores operating under the name Pier 1 Imports, which sell a range of furniture, decorative home furnishings, dining and kitchen goods, bath and bedding accessories, candles, gifts and other specialty items for the home. At the beginning of 2011 the Pier 1 had 1,046 stores, which includes 967 Pier 1 Imports stores in the United States and 79 Pier 1 Imports stores in Canada. The company also supplied merchandise and licensed the Pier 1 Imports name to Grupo Sanborns and Sears Puerto Rico, which sold Pier 1 Imports merchandise in a store within a store format in 38Sears Mexico stores and one store in El Salvador.

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

 

 

After bottoming out at $9 last year, PIR has been in a steady up trend since October. Along the way, PIR has formed a nice trend line of support (blue). Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. As you can see, PIR’s trend line is very important to the stock since it has been tested on (5) different occasions. Currently, the trendline support sits at around $16.50

The Tale of the Tape: PIR has created a nice trend line of support over the last (5) months. A long position could be entered on a pullback to the trend line support with a stop placed under the entry. A short position could also be entered if PIR were to break the trend line of support.

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