Shares of footwear designer and distributor Deckers Outdoor Corp (NYSE:DECK) have been exhibiting a series of constructive moves through the lens of technical chart analysis and that should now provide an opportunity for the bulls to pounce on.
As we will see in a minute on the charts below, DECK stock in late 2017 made a clear bullish move that then transformed it into a trend-following stock. As a general rule, trend-following stocks in my eye are best to be traded in the direction of the trend and trades entered upon the completion of the inevitable and not infrequent consolidation phases. Those consolidation phases rest the stock but also shake out the weak hands, which in turn allow for a next leg higher in the name.
DECK Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Moving on to the charts — and starting off with the multiyear weekly chart — we see that DECK stock found plenty of horizontal resistance in 2016 and 2017 around the low $70’s, as I marked with the gray horizontal box. In November 2017 the stock began to break out past this line of resistance, and this newfound up-swing remains intact to this date.
Since this breakout, the stock has had two consolidation phases, the second one of which is still taking place but looks just about ready to complete and allow the stock to move higher again.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see this most recent consolidation period more closely … it has been going on since June of this year. Note also that following the July 27 earnings report DECK stock gapped lower but closed the day’s trading session well off the intraday lows. This was followed with so called “follow-through” buying a few days later on Aug. 2, which further confirmed the washout selling.
As a side note, I see many novice traders spending arguably too much time determining whether a “consolidation” phase in a stock is a “wedging” pattern or “flag” pattern or whatever else they may call it. In my 21 years of trading experience I have found that a consolidation pattern is a consolidation pattern and it ultimately does not pay to enter trades before a trigger gets triggered, i.e. until a breakout to the upside has manifested itself.
Thus the trade here in Deckers is to buy DECK stock upon a push and hold above $120 for a move higher to a next price target at $130. Any sharp bearish reversal on a daily closing basis is a stop-loss signal.
Access Serge’s Free SSO Strategy eBook HERE — find high-probability trades like a Wall Street professional.