Coach (COH) — Like most assets classes and stocks, this luxury handbag and accessories maker rallied hard off the 2009 lows. Unlike the broader 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, retesting 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 the end of the steep rally off the 2009 lows, is to mark the vertical leap in the first quarter of 2012 as merely a dramatic overshooting out of a longer-standing consolidation phase. In other words, this consolidation phase began in July 2011 and lasts through the present. We can therefore also draw a line from the July 2011 highs to connect the dots, which puts COH exactly at key resistance right here and now (upper blue line on the chart above).
The daily chart reveals another consolidation phase with a tight pattern. After the stock gapped up on April 23, following its latest earnings announcement, it rallied higher for about a month. However, through a multi-month lens, COH ultimately settled into a consolidation phase.
After the stock’s latest rally off the June lows, it has worked itself back to the top of this range and is very close to breaking to a new year-to-date high, which could quickly lift COH 5% or more.
Despite the broader market’s seriously overbought readings, individual stocks developing tight patterns for breakouts continue to be found if one is willing to do a little digging. At this stage the trade I see setting up in COH is purely a breakout play rather than a level to initiate longer-term holdings.