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Today, we’re opening a new bearish trade on DSW Inc. (NYSE:DSW), which is a $2 billion footwear retailer with over 470 stores. DSW was able to drive growth numbers on the top-line and got a bit of a bounce from its last earnings report on Nov. 22, with the stock jumping 8% to push the $25 level.

However, that growth was “purchased” and merely made the underlying organic problems a little less obvious. Comparable-store sales are still negative, and the situation looks very similar to the circumstances that drove the stock lower in August and April.

We think that resistance at $26 will hold and bearish investors will push the stock back into the $22 range. The selling that emerged in retail apparel ahead of the weekend should also be supportive to our forecast, which confirms our timing.

‘Buy to open’ the DSW January (2017) 25 Puts (DSW170120P00025000) for a maximum price of $0.85.

You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.

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