After announcing earnings yesterday, Burberry tumbled lower and today is regaining some footing. The theme among clothing retailers has been the same, be it Aeropostale (ARO), Ralph Lauren (RL) or Gap (GPS)…higher input costs are weighing on profit margins.
The charts are broken for the medium term and there are various strategies to apply here. In the case of Burberry we think more meaningful support comes in just north of 1200 pence so outright short the stock is our choice of strategy.
In the case of RL where the options were juicy enough, selling far out of the money calls was more appropriate for us.
Either way and anyway, please kee an eye on these names and the consumer discretionary sector as a whole as it's been an unstoppable beast that now looks to be slowing down.