Aeropostale Inc (NYSE: ARO)

Aéropostale, Inc., together with its subsidiaries, operates as a mall-based specialty retailer of casual apparel and accessories. It provides a collection of apparel, including graphic t-shirts, tops, bottoms, sweaters, jeans, outerwear, and accessories for 14 to 17 year-old young women and men. The company also offers casual clothing and accessories focusing on kids between the ages of 4 and 12. As of December 4, 2013, it operated 902 Aeropostale stores in 50 states and Puerto Rico, 79 Aeropostale stores in Canada, and 151 P.S. from Aeropostale stores in 31 states and Puerto Rico. In addition, Aéropostale, Inc. markets its products through its Websites, www.ps4u.com, and www.aeropostale.com, as well as its licensees operate 88 Aeropostale stores, and 1 Aeropostale and P.S. from Aeropostale combination store in the Middle East, Asia, Europe, and Latin America under various licensing agreements. It also sells fashion footwear, contemporary apparel, and other accessories through GoJane.com.

Please take a look at the 1-year chart of ARO (Aeropostale, Inc.) below with my added notations:

1-year chart of ARO (Aeropostale, Inc.)

This stock is very simple. ARO had held a very important level of support at $8 (blue) for over 4 months. Regardless of what the market had or had not done over that period of time, the stock had never broken the $8 level – up until mid-January. After falling down to $6 the stock has now managed to rally back up and appears to be on course for a test of that previous $8 support.

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The Tale of the Tape: ARO had a key level of support at $8 that should now act as resistance. A trader might want to enter a short trade at or near the $8 level with a stop placed above that level. A break back above $8 would negate the forecast for a move lower.

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

Follow me on Twitter: @cmtstockcoach