GNC Holdings Inc (NYSE:GNC) has rallied about 40% since its January lows, and now the health and wellness retailer is coming into a major area of technical resistance. With first-quarter earnings season kicking off this week and retailer stocks as a group looking increasingly fragile again, GNC stock is one to watch.
After seemingly falling into abyss in the first month and a half of 2016, the U.S. stock market has rebounded sharply and climbed a wall of worry. The month of March was littered with central banks giving dovish statements, which to no great surprise helped stocks further rebound off those January/February lows.
The month of April looks to be very focused on corporate earnings, however, which in case you don’t know have been slowing since the first quarter of 2015. In many ways, stocks are now at a critical juncture where a disappointing earnings season could push stocks back toward the early 2016 lows over the next few months.
Considering these crossroads for stocks, I am looking at sectors, industries and single-name stocks that have arrived at an equally well-defined technical juncture, and GNC stock fits this picture perfectly.
GNC Stock Charts
Looking at the multiyear weekly chart, we see that after GNC stock topped out in 2013 after a vertical ascent, it staged one more rally in 2014 and the first half of 2015 before marking the chart with a significant lower high versus its 2013 highs, The stock then swan-dived by more than 50% into its November 2015 lows, along the way breaking below well-defined horizontal support (black line). The November 2015 lows were ultimately retested in January.
The rebound since then has GNC right back at this major horizontal area of former support, and bulls could have their work cut out for them. However, the longer GNC stock can hold up here without failing at this resistance area, the better the odds the stock ultimately climbs higher.
On the daily chart, we see that the November 2015 and January 2016 lows formed a comfortable double bottom and that GNC stock since managed to break back above its 50- and 100-day moving averages (yellow and blue lines, respectively). But the stock now also faces horizontal resistance from 2015, and any major bearish reversal here — particularly one that breaks the stock back below the aforementioned moving averages — should be a major warning flag that the stock will resume back to the early 2016 lows again.
On the upside, if GNC stock can break and hold above $32.50 area, it may begin filling its down-gap from last October, and also begin pushing higher toward its red 200-day moving averages, both of which have a price target around the mid- to high $30s.
Traders should closely watch this stock in coming weeks as two-way opportunities are well-defined: Short on a bearish reversal and buy above a break past resistance.
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