Abercrombie & Fitch (ANF) May Have More Upside

01/07/2011 Uncategorized  No comments

anf close up

 

Most people have heard of Abercrombie & Fitch (NYSE: ANF), if not for their clothing then for their often risqué advertising campaigns making headlines.  I’d love to give you a fundamental story here for this trade but for me this one here is just that, a trade.  As such I’ll refer to the technicals and how I could see managing this trade, although it is worth noting that Abercrombie & Fitch’s international expansion strategy is expected to contribute positively to the bottom line.

First let’s see the strong uptrend in place since July 2010; one that has now held between five and six tests depending on how closely you’re counting.  The sharp rally from April to the beginning of June this year has in recent weeks worked off some of the exuberance, bringing Abercrombie & Fitch (NYSE: ANF) back down near the uptrend line.

 

Stochastics have room to the upside, i.e. they are not yet in the ‘overbought’ territory above 80.

 

 

Also interesting to note is that since October 2010, each time Abercrombie & Fitch (NYSE: ANF) touched the blue uptrend and then consequently rallied, it never retraced more than 61.80% of that rally before rallying again.  Of course those of you that follow Fibonacci numbers know that 61.80% is an important Fibonacci level. 

Zooming in closer we see how the sharp April through early June rally broke but only about 10 trading days later on June 16th recorded a fairly bullish candle.  That low was again successfully semi-tested on June 27th, which now brings Abercrombie & Fitch (NYSE: ANF) to a near-term resistance area at $69. 

 

 

The trade I see setting up here is as follows:

Open long on a daily close above $69, Stop at $66 and a profit target at $77.50.

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