Buy Michael Kors Holdings Ltd for Some Christmas Cheer (KORS)

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Shares of apparel company Michael Kors Holdings Ltd (NYSE:KORS) surged more than 8% on Wednesday after reporting better-than-expected numbers for its latest quarter.

Beat the BellKORS stock has been in a sea of hurt all year, and while shares remain materially lower for the year and since their 2014 highs, Wednesday’s rally may have helped kick-start a better tone. Certainly, one day does not make a trend, but if we apply some technical analysis, a bottoming process looks to have been in place for several months, allowing active investors to play Michael Kors stock from the long side.

Specifically, in its latest quarter, Michael Kors earned $1.01 per share on revenue of $1.13 billion. This top-line number was up nearly 7% on a year-over-year basis, in part helped by new store openings and despite currency headwinds.

In addition to tightening its top- and bottom-line range for the current quarter and fiscal year, KORS also announced it will increase its share buyback program by $500 million.

To be clear, I am not proclaiming that KORS stock is about to skyrocket higher from here, particularly considering the continued slowing global economic growth trend late in the economic expansion cycle. However, as we will see on the below charts, a bottoming process may be in place.

KORS Stock Charts

Looking at Michael Kors through a multiyear lens, we see that the sharp and persistent drop off its spring 2014 highs by August had revisited its May 2012 lows, and since then, KORS stock has been chopping back and forth on this horizontal line.

The drop in the stock amounted to about 65% and wiped out the entirety of its 2012-14 bull run.

Michael Kors stock chart weekly
Click to Enlarge

On the daily chart below, we note that KORS stock last week made a marginal higher low versus its late-August lows, which was confirmed with Wednesday’s 8.27% rally, which was accompanied by a big spike in volume. While on Wednesday, Michael Kors failed to close at the day’s highs and above diagonal resistance from June (black line), it did marginally surmount both its 50 and 100 day moving averages (yellow and blue lines respectively).

On the upside, KORS stock has plenty of target magnets to work toward to should it be able to build upon Wednesday’s momentum. First are the June highs around the $48-$49 area and much higher in the high $50s is the top of the big down-gap from May 27.

Michael Kors stock chart daily
Click to Enlarge

From here, active investors with less risk aversion could look to initiate a partial long position in the stock or sell out-of-the-money puts, while somewhat more risk-averse investors will want to first see if the stock can hold and built upon Wednesday’s momentum.

Any yielding of Wednesday’s rally back to the $40 area would get KORS stock right back into neutral to negative mode and should act as a warning sign that shares are not yet ready to churn  higher.

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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. 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/2015/11/michael-kors-holdings-ltd-kors-stock-christmas/.

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