Thursday, March 27, 2014

ARO Aeropostale Daily Chart Downward-Sloping Channel Oversold Falling Wedge Positive Divergence

ARO is puking ever since the weak holiday season. Teens are not working as much these days and when they ask for dough off the parents, there is likely less to go around. The trip to the mall also takes five or ten bucks of gasoline so perhaps these days many would-be shoppers are laying around at home. Apparel sales are hit lately across the board. Aeropostale is a strong brand, however, and many teenagers and young adults continue to proudly walk around with the label. The stock continues to collapse falling out of the downward-sloping wedge.

The gap down move in mid-March was an eye-opener; a stick was jabbed in that eye. Price has plummeted and now sits on an island under 6 so a potential island reversal would be in play in the future. Positive divergence bounced price in mid-February. The positive divergence remains over the last couple months although the very near few-day time frame shows the bears making a push. The expectation is for a positive divergence bounce. The weekly chart is also setting up with positive divergence but may need another one to three weeks to base. When both the daily and weekly charts combine with universal possie d that is a very bullish indication.

It may be a bit early but Keystone bot ARO today creating a new long position. This is a true knife catch that either slices off the hand or is caught with the handle. It may take a little patience moving forward but a move back up to at least back kiss the lower trend line would be a reasonable expectation in the near-term. Note the large capitulatory selling volume during the gap down. Traders were running from ARO screaming and rightfully so since sub 6 led lower now under 5. Many times one more strong capitulatory down day will occur to completely flush out even the most die-hard long player that held on the whole way down. Once this final flush occurs and everyone has completely given up, and talk of bankruptcy will probably be floated by investment house stoolies trying to keep the price low so they can accumulate, the stock will recover.

ARO is a highly speculative long play. Time will tell if it turns out like the greatness of JCP, or ends in disaster like RSH. Sometimes an advantage of a stock that is bludgeoned like ARO is that once the broad market begins selling off, and the retail sector as a whole sells off, the stocks that are beaten down already do not typically receive as serious a beating. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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