Hi all,
Since we have started 2016 on a bearish note, here's yet another a short idea which is at least not too obvious.
The concept is to go short on a fashion design company, given that expectations of profit growth may not be that rosy, given the current economic outlook.
In other words, if more people are worrying whether they can keep a job to meet their mortgage payments, then fashion spending may not be a high priority for a lot of people this year.
1. KATE has been trading a strong upwards trend, from $12s in Jan 2013 to as high as $40s in Mar 2014.
However price faced sharp selling after Mar 2014 and price was only able to revisit above $40s in Jul 2014, followed by the breaking of the trend line on Aug 2014.
In other words, the bullish trend of the past years have ended as of Aug 2014.
2. After Aug 2014, price found support at around $24 and try to reach higher, but is only able to get as far as $34.00s.
This a large scale topping pattern which looks nothing like what you read in classic chart pattern literature.
The one of price peak is shorter than the other and price movement is pretty noisy.
However make no mistake that in the big picture, a clear bearish trend is being defined right here.
3. If we cut through the noise, we can observed a likely 5-Wave Elliott pattern in the formation, with the last impulse wave currently in motion.
Projection:
Given that
a) price is currently in an overall bearish environment
b) price seems to be working out the last move of a 5-Wave Elliott pattern
It is likely that price will trade lower for the next 3 months.
Entry:
Anytime from now as long as price is trading below 17.00.
The 5th Wave is already in motion, so entering a position is a bit similar to getting on board a train that is starting to accelerate.
Stop Loss:
Above 17.00.
Taking Profit:
A simple approach will be to close the position when it reaches around $10.
Another way will be partially close out the position if price manages to breach 3 price levels progressively.
50% at 14.00
30% at 12.00
20% at 10.00
Time limit:
If price moves lower but is unable to reach $10.00 by the first week of April 2016, then it indicates a lack of bearish momentum and all short positions must be closed by that time.
Risk:
There is a risk that the upcoming earnings release on March may trigger price to move against the projected scenario.
There is also a risk that weakening stock prices may attract takeover interest which again will interfere with the technical projection of the price.
Summary:
We project that a short position can be entered in KATE, any time now below $17.00 and looking to take profit as price moves towards $10 by first week of April 2016.
References:
Elliott Wave> www.investopedia.com...technical/111401.asp
Since we have started 2016 on a bearish note, here's yet another a short idea which is at least not too obvious.
The concept is to go short on a fashion design company, given that expectations of profit growth may not be that rosy, given the current economic outlook.
In other words, if more people are worrying whether they can keep a job to meet their mortgage payments, then fashion spending may not be a high priority for a lot of people this year.
1. KATE has been trading a strong upwards trend, from $12s in Jan 2013 to as high as $40s in Mar 2014.
However price faced sharp selling after Mar 2014 and price was only able to revisit above $40s in Jul 2014, followed by the breaking of the trend line on Aug 2014.
In other words, the bullish trend of the past years have ended as of Aug 2014.
2. After Aug 2014, price found support at around $24 and try to reach higher, but is only able to get as far as $34.00s.
This a large scale topping pattern which looks nothing like what you read in classic chart pattern literature.
The one of price peak is shorter than the other and price movement is pretty noisy.
However make no mistake that in the big picture, a clear bearish trend is being defined right here.
3. If we cut through the noise, we can observed a likely 5-Wave Elliott pattern in the formation, with the last impulse wave currently in motion.
Projection:
Given that
a) price is currently in an overall bearish environment
b) price seems to be working out the last move of a 5-Wave Elliott pattern
It is likely that price will trade lower for the next 3 months.
Entry:
Anytime from now as long as price is trading below 17.00.
The 5th Wave is already in motion, so entering a position is a bit similar to getting on board a train that is starting to accelerate.
Stop Loss:
Above 17.00.
Taking Profit:
A simple approach will be to close the position when it reaches around $10.
Another way will be partially close out the position if price manages to breach 3 price levels progressively.
50% at 14.00
30% at 12.00
20% at 10.00
Time limit:
If price moves lower but is unable to reach $10.00 by the first week of April 2016, then it indicates a lack of bearish momentum and all short positions must be closed by that time.
Risk:
There is a risk that the upcoming earnings release on March may trigger price to move against the projected scenario.
There is also a risk that weakening stock prices may attract takeover interest which again will interfere with the technical projection of the price.
Summary:
We project that a short position can be entered in KATE, any time now below $17.00 and looking to take profit as price moves towards $10 by first week of April 2016.
References:
Elliott Wave> www.investopedia.com...technical/111401.asp