Two Sides To GUESS (NYSE: GES)

 

 

GUESS (NYSE: GES) designs and distributes lifestyle clothing and operates about 425 stores in the U.S. and Canada and about 100 stores outside of the U.S. and Canada.

The three year weekly chart shows a solid up-trend over the past 24 month.  In 2010 the stock found resistance twice just north of $51, which has led the stock to trend down so far in 2011 and form a sort of bull flag formation (blue lines) marked by a series of lower highs and lower lows.

 

If we look at a daily chart dating back to August 2010 several things stick out.  First note the uptrend line (red dotted line) that the stock closed below yesterday.  Second, the stock is trading below both the 50 and 200 day simple moving averages.  The stock now should have room to fall as low as the lower end of the downward sloping channel (blue lines). 

 

I often state how important it is to look at the markets in multiple time-frames as it helps with risk management and gives better perspective of the market’s current standpoint. 

Case in point is the stock of GUESS (NYSE: GES).  The shorter term trade here apparent on the daily chart above might be to short the stock down to around the $35 mark with stops in place around $42. 

However, there is also a longer-term growth story to this stock as sales growth as well as profit margin growth could be leading to a higher stock price over the next twelve months.  This brings us back to the weekly chart.  On the longer-term chart the investor has the option of buying a breakout above the upper blue line or get in on the long side as early as the price crosses back above the 200 day simple moving average.  The longer-term investor could then look at $51 as an initial price target.

 

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