3 Big Stock Charts: Williams-Sonoma, Inc. (WSM), Lowe’s Companies, Inc. (LOW) and Coach Inc. (COH)

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The market normally favors the retail and consumer discretionary stocks from the end of summer through the Thanksgiving holiday. Our historical studies show that these two sectors beat the S&P 500 performance for that period almost 70% of the time, but that may be different this year.

The technical charts are turning on some of the larger names within this group, as Williams-Sonoma, Inc. (NYSE:WSM), Lowe’s Companies, Inc. (NYSE:LOW) and Coach Inc. (NYSE:COH) have all seen short-term bearish technical patterns form this week.

Williams-Sonoma, Inc. (WSM)

160830 WSM Stock Price
Source: Chart courtesy of StockCharts.com

Housewares company William Sonoma is trading more than 40% off of its all-time highs that were posted in August 2015. The stock is deep in bear-market territory and locked in a multimonth trading range that has maintained prices between $56 and $50. Now, a bearish signal looks to take Williams Sonoma through the bottom of this range.

Last week, the negative momentum of the stock caused a bearish cross-under of its 20- and 50-day moving averages. This is typically a sign that the stock is ready to move lower as the short-term technicals take hold of momentum.

The recent cross-under is magnified by the resistance exhibited by the stock’s 200-day moving average, which is declining and presides at the $55.63 level. This is where the stock was stopped cold Last Thursday. The rejection was also on a spike on volume, signaling that the technical traders may have even less conviction in the stock’s ability to hold current levels.

The signal suggests that Williams Sonoma stock is set for another decline that will likely take shares to the $48 level, which provides chart support. That’s about a 10% decline from last night’s close.

Lowe’s Companies, Inc. (LOW)

Williams-Sonoma, Inc. (WSM)
Source: Chart courtesy of StockCharts.com

Another company that is seeing a short-term bearish signal from a 20- and 50-day cross-under is the Lowe’s Company. This is another housing company that has benefitted from the recover in the housing sector, unlike William’s Sonoma. Lowe’s shares are trading near their all-time highs, which were struck last month.

The stock had been testing long-term overbought readings, though they have subsided after the rapid decline from $82 to $77. This sell-off has now caused a bearish cross-under of the 20- and 50-day moving averages. The last of these signals preceeded a move from $76 to $66 in January 2016.

In addition to the bearish cross-under, Lowe’s shares are trading just above their 200-day moving average, of which a break below would cause another group of technical sellers to enter the market.

The company is just recovering from a disappointing earnings report two weeks ago and now may have to deal with the high likelihood that the housing market valuations are creeping towards “bubble” territory, something that would add pressure to the company’s stock.

Watch for a break below the $75 level to challenge the stock’s 20-month moving average as shares are likely to move to the round-numbered $70 level. A move here would put Lowe’s Company shares in a technical bear market as it would represent the first break below their 20-month moving average since January.

Coach Inc. (COH)

160830 COH Stock Price
Source: Chart courtesy of StockCharts.com

Domestic and global economic weakness have both caused some serious fundamental lag for the upscale leather and apparel maker Coach Inc. The fundamental weakness has resulted in one of the few consumer discretionary stocks that is trading deeply in bear market territory. Unfortunately, the technicals are signaling more short-term pain for COH shares.

After trading to resistance at their 50-month trendline (yes, 50-month), Coach appears ready to move back to the support of the 20-month moving average.

Getting a little closer, the 20-day moving average just crossed under the 50-day on August 24, signaling an upcoming increase in selling pressure as the technical trend is now favoring the bears. This happens as the stock is now breaking through the $39 level, which has offered chart support dating back to April.

The last occurrence of a similar cross-under was in April 2015, before the stock ran lower from $39 to $27. In this case, we don’t see this much carnage being done to Coach Inc. shares, but the charts and current technicals indicate a target of $31.

As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/three-big-stock-charts-tuesday-williams-sonoma-inc-wsm-lowes-companies-inc-low-coach-inc-coh/.

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