Abercrombie & Fitch Company, through its subsidiaries, is a specialty retailer that operates stores and direct-to-consumer operations selling casual sportswear apparel, including knit and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products, and accessories for men, women and kids under the Abercrombie & Fitch, Abercrombie kids, and Hollister brands. In addition, the company operates stores and direct-to-consumer operations offering bras, underwear, personal care products, sleepwear and at-home products for women under the Gilly Hicks brand. A&F brands include Abercrombie & Fitch, Abercrombie Kids, Hollister and Gilly Hicks.
To analyze Abercrombie’s stock for potential trading opportunities, please take a look at the 1-year chart of ANF (Abercrombie & Fitch Company) below with my added notations:
Over the last (7) months, ANF has found common areas of support and/or resistance on or at the increments of $5. First, notice the $55 level (green) that was previous support in August and November. Next, you can see the $50 level (navy) that was resistance from November until February, and lastly, there’s the bottom level of support at $45 (brown).
The nice thing about ANF is that it shows you how to trade it no matter what direction the market moves. If you like the short side of the market, you could either short ANF on rallies up to a $5 level or on any breakdowns of them. If you want a long play instead, you could buy ANF on a pullback to a $5 level or on any breakout through one of those levels.
The Tale of the Tape: If ANF rallies back up to $55, you could enter a short play. If it breaks above $55, you would certainly want to enter a long play. You could also buy ANF if it comes back down to the $50 level, or short the stock if it breaks that $50 support. If the stock were to break below $50, the $45 level would come back into play for a trade as well.
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