The consumer discretionary sector of stocks is up by roughly 13% for the year-to-date and one of the best-performing groups of stocks in the S&P 500 in this period. Shares of Michael Kors (NYSE:KORS), although higher for the year, are lagging this movement and, through the lens of technical analysis, still showing plenty of giddiness for a breakout to the upside.
Before looking at the charts, allow me to offer the counter-argument to a bullish trade setup in KORS stock. The consumer tends to feel best toward the end of an economic expansion period, which then leads to more consumer discretionary spending. Considering this latest bull market is about nine years in the making and thus historically on the longer end of things, it is not unreasonable to expect the U.S. economic growth picture to very soon reach (or maybe have already reached) peak performance for the cycle.
If that is the case, then consumer discretionary stocks as a group may soon run on borrowed time.
However, separating time frames, in my humble opinion, is one of the keys to profitable stock market navigation, which is to say that while I see consumer discretionary having less upside through a multi-month/quarter lens, in the multi week time frame a name like Michael Kors could indeed still show plenty of rally time.
KORS Stock Charts
Moving averages legend: red – 200 month, blue – 100 month, yellow – 50 month
On the multiyear weekly chart, we see that although KORS stock is nowhere near its 2014 highs from where it crashed in a meaningful way, it is showing orderly price movement.
First, see that in late 2017, the stock pushed back above its red 200-week moving average as well as back above its early 2016 highs that I marked with the black horizontal. Since then, the stock has repeatedly used this line as support and the stock has in the larger sense year-to-date simply consolidated sideways.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see the 2018 sideways shuffle a little better but also see that in early June, KORS stock bounced off its red 200-day moving average, marking a critical spot in the intermediate term. Over the past few weeks the stock has largely chopped back and forth in a sideways motion, but this consolidation is taking place right below its 2018 highs.
Finally, on July 12 KORS stock got hit by trade war fears but managed to close well off its intraday lows. While the stock here in my eyes still needs to prove follow-through buying and preferably a push above $68 on a daily closing basis, if and when that happens a next upside target in the $72-$75 area could open up for a trade. Once the trade triggers, a stop loss could be placed at $65.
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