Apparel designer and distributor Ralph Lauren Corp (RL) has left a monster stock run higher behind on the chart off the 2009 broader market lows. The stock however reached a high in March 2012 and has thus not managed to make higher highs since, unlike the broader stock market of course. On the back of reaching an all-time high in March 2012, the stock proceeded to re-test its 2009 up-trend, followed by an attempt to re-test the March 2012 highs. In February 2013 he stock fell just short of a perfect re-test, and has traded sideways to lower since. Bears will point to a double top, bulls to the still constructive posture of the longer-term chart.
The great aspect about swing trading is that one does not need (in fact shouldn’t have) a firm opinion on the direction of the stock. Because swing trading allows a trader to operate in multiple time-frames, one merely needs to pin-point reference levels above/below which the odds of a continuation/break of trend increases.
As it relates to Ralph Lauren Corp (RL), the current near-term level of support I am eying is right at $166. The level has been tested no less than seven times over the past four weeks, which thus allows for a defined line in the sand: a daily break below and the stock has further to slide. The $166 level also coincides with the 38.20% Fibonacci retracement of the December 2012 – February 2013 rally. Next support comes in at $162 and $158, which reflect the 50% and 61.80% Fibonacci retracement levels respectively. The multi-year up-trend from the chart above comes in closer to $155, thus near the 61.80% level, which makes for a solid confluence support area and thus a good target for a short-side swing trade should the stock break below $166 on a daily closing basis.