We’re recommending a new bearish trade on Ann Inc. (NYSE:ANN), the specialty retail stock best known for its stores Ann Taylor and LOFT brands. ANN broke the support of a long-term bearish channel late last month. Since then the stock has bounced up a bit and is right now at the lower channel boundary, which we expect to act as resistance. Performance in this sector has been mixed at best with “positive” reports not resulting in many gains and negative reports being sold aggressively. Expectations for ANN are already low and we expect this most recent rally (largely driven by its peer, Chico’s FAS Inc. (NYSE:CHS)) to set traders up for a near-term decline either just before or just following earnings on Friday.
The stock rallied a bit early this week, which has brought the value of the puts we were watching last week down. Despite the move up, the 28 puts still look the most attractive and could go in the money very quickly.
Recommendation: Buy to open the ANN Apr 28 Puts (ANN130420P00028000).
John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next trade and get 1 free month today by clicking here.