Coach: COH Stock Is Hanging On By a Thread

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Shares of luxury goods company Coach Inc (COH) suffered Tuesday after the company beat analyst expectations on both the top and bottom lines but sales slipped 10% on a year-over-year basis. As a result, COH stock dropped to a crucial line of support, and if it breaks below it, it could bring about another significant leg lower that you can take advantage of.

beat the bell stock investing adviceCoach earnings of 53 cents per share were 30% lower year-over-year but still beat expectations of 46 cents. Meanwhile, revenues declined 10% to $1.04 billion, just getting past estimates for $1.01 billion. For the quarter, North American sales dropped almost 20%, though international sales edged up 4%. All in all, Coach is facing increasing competition — most notably, Michael Kors (KORS) — and the sales trend is not inspiring investors, which of course is represented in the price of COH stock.

COH Stock Charts

Looking at the multiyear chart of COH stock, note that after topping out in spring 2012, Coach quickly slipped into late summer and then settled into a 20-month sideways move that increasingly weighed on a line of support around the $46 area.

In April of this year, COH finally broke below this line of support and since June has been consolidating just above the next layer of support. If this next line of support around the $33.50-$34 area gives, then a trap door could open and quickly let the stock fall further.

coh stock chart weekly

Tuesday’s 5.95% post-earnings selloff came on a spike in volume. The stock traded about 15.75 million shares on Tuesday, compared to an average closer to 5 million. From a momentum perspective, the stochastic oscillator shows that the stock has more room on the downside. Tuesday’s selling came on a down-gap at the open, which the stock never retested.

After briefly piercing below the summer lows, COH stock closed Tuesday’s session off those lows … but also right at the bottom of its multimonth trading range.

As I often say, the longer a stock weighs on support or pushes against resistance, the higher the likelihood of an ultimate failure of support/resistance.

coh stock chart daily
Click to Enlarge

From a tactical perspective, COH stock will soon either make a bullish stand by way of a bullish reversal that quickly erases Tuesday’s losses, or it will accelerate the downward spiral into the $30 area.

Active traders and investors could look to short the stock on a break below Tuesday’s intraday lows near $33.25 for a move toward $30, while using the $35 area as a stop-loss.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/10/coach-coh-stock-hanging-thread/.

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