Clothing accessories maker Coach, Inc. (COH) designs, produces, and markets luxury leather goods. Much like most assets classes and stocks, it rallied hard off the 2009 lows. Unlike the broader US stock market however, the stock rallied into a medium-term blow-off top in March 2012. From there, after a too-steep-to-be-sustainable slope, the stock slipped a good 40% over the course of five months, which ultimately re-tested the lower end of a support line again in February 2013. Another way of looking at the price action off the July 2011 reaction high, or end of the steep rally off the 2009 lows, is to mark the vertical leap in the first quarter of 2012 as just a dramatic overshooting out of a longer-standing consolidation phase. This consolidation phase then began in July 2011 and lasts through the present. We can thus also draw a line from the July 2011 highs to connect the dots, which puts the stock exactly at key resistance right here right now (upper blue line on chart).
The Daily chart of Coach, Inc. (COH) reveals another consolidation phase with a tight pattern. After the stock gapped-up on April 23rd post its last earnings announcement, it rallied higher for another month but through a multi-month lens ultimately did settle into a consolidation phase. After the stock’s latest rally off the June lows it has worked itself back to the up of this range and is THIS far from breaking to a new year to date high, which could quickly lift the stock 5% or more.
Despite the broader market trading in seriously overbought readings, individual stocks developing tight patterns for breakouts continue to be found of one is willing to do a little digging. At this stage the trade I see setting up in Coach, Inc. (COH) is purely a breakout play rather than a level to initiate longer-term holdings.