Shares of women’s apparel company Ann Inc (NYSE:ANN) — along with many other apparel retail stocks — are holding up better than the broader U.S. stock market year-to-date. That might be at least in part due to more hope from the American consumer, who has seen purchasing power increase along with a surging U.S. dollar.
ANN stock also is constructively positioned from a technical perspective, and continued upward pressure could soon see shares break past a key layer of price resistance.
On March 13, Ann Inc reported better-than-expected fourth-quarter earnings. Gross margins for the company narrowed, but sales climbed to $647.4 million from $623 million, and earnings of 12 cents per share easily beat the analyst view of a 3-cent loss. While Ann’s full-year revenue forecast came in a tad under estimates, Wall Street broadly liked the news and pushed shares sharply higher after the results.
Retail stocks — as represented by the SPDR S&P Retail (ETF) (NYSEARCA:XRT) — are up more than 5% year-to-date, thus showing relative strength vs. the broader market. And when the broader market has been as rangebound as it has been in 2015, you want to look at any pockets of relative strength you can find.
ANN Stock Charts
Starting with the multiyear weekly chart, we see that ANN stock — after a steady rise off the 2009 lows — again reached its 2006 price levels in spring 2014. But since then, ANN stock has been largely stuck in a wide trading range and is consolidating years’ worth of gains, just below the red dotted horizontal line of resistance. And that’s fair — after a multiyear run-up, one wouldn’t have expected Ann stock to just simply burst past its 2006 highs.
However, after 12 months of consolidation and given 2015’s show of relative strength from retail stocks, a break higher seems to be in the offing.
Zooming in on the daily chart, we see that ANN stock gapped higher after its earnings report in early March but quickly settled into its next mini consolidation phase just below its horizontal line of resistance from one year ago. Note that with the breakaway gap from March 13, the stock also gapped above its 200-day simple moving average (red line).
ANN stock is thus visibly coiling up below resistance lines on both the multiyear and daily charts. Active investors could consider buying ANN stock on a break above the $42.50 area for an initial rally toward $46.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
