Ralph Lauren Corporation designs, markets, and distributes lifestyle products worldwide. The company operates in three segments: Wholesale, Retail, and Licensing. It offers apparel, including a range of men’s, women’s, and children’s clothing; accessories, which comprise footwear, eyewear, watches, fine jewelry, hats, belts, and leather goods, such as handbags and luggage; home products consisting of bedding and bath products, furniture, fabrics and wallpapers, lightings, paints, tabletops, and giftware; and fragrances. Ralph Lauren Corporation sells its products to department stores, specialty stores, and golf and pro shops, as well as through its retail stores, concession-based shop-within-shops, and its e-commerce sites. The company also sells its apparel, home, and other products through licensing alliances.
Take a look at the 1-year chart of Ralph (NYSE: RL) below with added notations:
After a rough slide in January, February and March, RL started trading sideways over the following 5 months. While in the sideways move, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
RL’s rectangle pattern has formed a resistance at $140 (red) and a $127.50 support (green). At some point the stock will have to break one of the two levels.
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The Tale of the Tape: RL is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $127.50 or on a breakout above $140. The ideal short opportunity would be on a break below $127.50.
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