When it comes to trading a stock hitting a 52-week low, I prefer to look for ones hitting a “NEW” low. As with stocks hitting new 52-week highs, to me a stock hitting a new low would be a one that hasn’t hit a new 52-week low in quite some time. In addition, and more importantly, I want the stock to have broken through a key area of support.
Guess?, Inc. designs, markets, distributes and licenses apparel and accessories for men, women and children. The company operates in five: Europe, North American Retail, Asia, North American Wholesale and Licensing. Its products are sold through retail, wholesale, e-commerce and licensing distribution channels. The lines include full collections of clothing, including jeans, pants, skirts, dresses, shorts, blouses, shirts, jackets, knitwear and intimate apparel. It also grant licenses to manufactures and distributes a range of products, including eyewear, watches, handbags, footwear, kids’ and infants’ apparel, leather apparel, swimwear, fragrance, jewelry and other fashion accessories. In 2012, along with its distributors and licensees, Guess Inc. opened 224 stores in all concepts combined outside of the United Sates and Canada, which consisted of 120 stores in Europe and the Middle East, 89 stores in Asia and 15 stores in the combined area of Central and South America.
To review Guess’ stock, please take a look at the 1-year chart of GES (Guess?, Inc.) below with my added notations:
As you can see, GES has been in an overall sideways move since August of last year. During that period of time, that stock has held a clear level of support at $26 (black). Even though the market has caused most stocks to move higher since October, GES has not been able to follow suit. In addition, GES has now fallen back down at its 52-week low support again.
The Tale of the Tape: GES has formed a key support level of $26, which is also a 52-week low. Although a long trade could be made at $26, the stock does seem poised to break lower. A short trade should be entered on GES if the stock breaks below $26 with a stop set above that level.
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