Various sub-sectors of the clothing industry are among top price performers these days. Some of these are out of buy range, but could offer new entry points on the next moving-average pullback, writes MoneyShow's Kate Stalter.
The apparel sector has been home to winning stocks throughout the weak economy of the past few years. It hasn’t always been the same stocks that have been in positions of leadership; instead, various stocks have cycled through the ranks of top performers.
A couple of fairly recent IPOs that I have tracked for months are now perched comfortably near their highs. Francesca’s (FRAN), a Houston-based women’s apparel chain, rallied to an all-time high of $36.11 on Monday, then reversed intraday. The stock went public in July 2011, at $17.
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It got support at its five-day exponential moving average on Tuesday, and in the first half of the session, was on track for a new closing high.
This is a fairly volatile stock, with a beta of 1.31. It often shows wide intraday and intraweek price swings, making it potentially hard to hold.
Every stock purchase needs to be accompanied by a stop-loss point, either mentally or entered into your brokerage account. That’s even more crucial with volatile stocks like Francesca’s, which can exhibit sudden price drops that can result in fast losses for retail traders and investors.
The company will report its second quarter on September 4. Analysts are eyeing earnings of 12 cents per share on revenue of $71.09 million. That would represent a decline on the bottom line, but a significant gain on the top line. Francesca’s beat earnings views in each of the past three quarters.
Another prominent gainer from the ranks of newly public women’s clothing retailers is Michael Kors (KORS). The luxury retailer went public at $20 in December.
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Last week, the stock rocketed 23% following the company’s earnings report. It’s holding the majority of its gains, retreating less than 1% for the week, as of Tuesday. That’s very normal price action following a huge, earnings-driven rally. Watch for the stock to consolidate above short-term moving averages to offer a possible new entry opportunity.
|pagebreak|From yet another part of the clothes closet is Under Armour (UA). The athletic clothing maker is a mid-cap, with a market value just shy of $6 billion. It trades around 2 million shares a day, excellent liquidity.
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The company went public in November 2005, and finished its debut month at $11.26. On Tuesday, it was trading at around $57, below its August 7 high of $58.48.
Under Armour is showing some potentially bullish action on its chart. It’s currently in a buy zone, as it hovers between its five-day EMA and that prior high.
In addition, its previous price consolidation was a possible set-up for further gains. The stock retreated to a low of $44.07 on July 12. That undercut the prior trough of $44.30 from May.
When a stock falls below a previous low, even when it’s only by a few cents, as in this case, it is often a signal that the investors lacking in conviction have been flushed out. That can pave the way for value-oriented investors to swoop in and buy.
Since that July 12 low, Under Armour has advanced 29%.
Of course, one of the most clear apparel movers Tuesday was Urban Outfitters (URBN), gapping up 18% in enormous volume on the heels of a better-than-expected second-quarter report.
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On Tuesday, the stock was trading at around $37.65, its best levels since March 2011.
This is a situation similar to that of Kors: Rather than chasing the gap, retail traders are better off waiting for a pullback to a short- or medium-term moving average before attempting a purchase.
The institutions liked Urban Outfitters’ report. A number of analyst shops, including William Blair, Robert W. Baird, JP Morgan, Wells Fargo, and Brean Murray, weighed in with upgrades or price target boosts.
At the time of publication, Kate Stalter did not own positions in any of the stocks mentioned in this article.
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