DSW Inc. (NYSE: DSW)

DSW Inc., together with its subsidiaries, operates as a branded footwear and accessories retailer in the United States. The company operates through two segments, DSW and Affiliated Business Group. It offers dresses, casual and athletic footwear, and accessories under various brands for women, men, and kids. The company also provides handbags, hosiery, jewelry, and other accessories. As of November 5, 2015, it operated 469 stores in 42 states; dsw.com, an ecommerce site; m.dsw.com, a mobile site; and an interactive mobile app, as well as supplied footwear to 379 locations in the United States.

Take a look at the 1-year chart of DSW (NYSE: DSW) below with added notations:

1-year chart of DSW (NYSE: DSW)

DSW had been in a consistent downtrend up until this past November. After that decline, the stock started trading sideways over the most recent 3 months. While in that 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.

The DSW rectangle pattern has formed a resistance at $25 (red), and a $22 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: DSW is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $22 or on a breakout above $25. The ideal short opportunity would be on a break below 22.

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