ANN Inc (NYSE: ANN) is a leading specialty retailer for fashionable women’s clothing with about 900 stores. From a fundamental point of view, the company has been under pressure from investors about their gross margin compression and this has been somewhat reflected in the stock price as of late.
If we look at a three year weekly chart the longer-term up-trend in place since early 2009 is apparent. It has been an orderly and healthy move higher over recent years, and not one marked by vertical leaps or drops.
If we zoom in closer on the chart we note the solid support or pause that this stock has taken in the past when it approached the 200 day simple moving average (red line), which is a further sign of the systematic waves in which this stock has moved higher. The stock does now however look precarious to slip lower and the Stochastics for one example still have much lower to fall before being in oversold territory (note the gray zone at the bottom right of the graph.)
The potential cliff that the stock price of ANN Inc (NYSE: ANN) currently sits on is best seen on the close-up chart below. After dropping from the recent highs on May 13th the stock found support at the 200 day simple moving average and has moved sideways since, creating a bear flag pattern of sorts. Now, with the 50 day simple moving average above and beginning to slice through the 200 day simple moving average the stock looks very slippery and could fall out of this pattern quickly.
The trade I see setting up here is to go short near yesterday’s closing price with a first profit target near $24, which also coincides with the bottom of upward sloping channel on the weekly chart above. A potential second target is closer to $22. Initial stops can be set at $26.50.