Michael Kors Holdings Ltd: Trade the KORS Stock Rally

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Michael Kors Holdings Ltd (NYSE:KORS) stock rallied 6.6% on Wednesday following the company’s latest quarterly earnings report, which came in much better than analysts had expected. KORS stock has seen some wild price movements year-to-date, but Wednesday’s up-gap and rally looks to have confirmed at least a near to intermediate-term low in the stock.

Beat the BellThat sets up a pair of potential trades that you can sink your teeth into.

Specifically, for its fiscal fourth quarter, Michael Kors showed a profit of $176.3 million, which was down from $183 million on a year-over-year basis. However, the top line grew from $1.08 billion to $1.2 billion.

Guidance for both fiscal Q1 and the full year came in cautious mostly because of increased spending on the company’s part and a challenging retail environment overall. Nonetheless, KORS stock jumped after the news on Wednesday, and barring a one-day wonder, it looks to have put in a tradeable higher low versus the January lows.

Michael Kors (KORS) Stock Charts

On the weekly chart, we note that after a well-defined downtrend from early 2014 into this January, KORS stock staged a notable breakout in February and March. However, investors and traders acted too exuberant, and the stock ultimately almost entirely retraced this breakout by mid-May. Of course, that may have just been the necessary retest of the February breakout point.

This doesn’t mean KORS stock will start stampeding higher again, but instead, it might just mean that the downside is limited for the time being.

Michael Kors chart daily
Click to Enlarge

On the daily chart, we see that as a result of the sharp decline off the March highs, KORS stock in mid-May once again reached notable oversold readings, as measured by the MACD momentum oscillator at the bottom of the chart.

Wednesday’s 6.6% rally, which came on a good uptick in volume, bounced Michael Kors right back into its red 200-day simple moving average, which may act as some resistance in the immediate term. If and when this line is overcome, however, KORS stock may take on its next upside target closer to the $50 area. This upside target is made up of the blue 100-day moving average and the top of the down-gap from May 11.

Michael Kors stock chart daily
Click to Enlarge

Active investors and traders could buy KORS stock upon a break above the 200-day MA and thus a confirmation that Wednesday’s rally was not just a one-day wonder.

Alternatively, a more conservative approach may be to make a bet that KORS over the next couple of months does not fall back below the recent higher lows in the low $40s, which would mean selling an out-of-the-money put or put spread.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/michael-kors-holdings-ltd-nyse-kors-stock/.

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