Friday, August 22, 2014

ARO Aeropostale Daily Chart Inverted H&S Potential Island Reversal

ARO was a fun one to ride. The stock was pointed out about three weeks ago at the exact bottom. The dark green lines show the falling wedge, oversold conditions and universal positive divergence forecasted a bounce, which occurs. In addition, the weekly chart was set up the same way which typically leads to a double whammy of joy, and it did. You win with some of these speculative stocks, and others you lose. This was/is a clear winner. Today ARO is smacked -9% but it was up +23% on the week. Keystone is out of the trade having exited on the pop but ARO can be held as a long-term trade. The weekly chart is very constructive going forward. Note the buying interest that has developed in the stock (volume).

Aeropostale is so far beaten down it should weather the storm better if the broader market sells off strongly. Price gapped up strongly due to the strong possie d so price will likely want to play around sideways to consume that 3.2-3.5 gap area. The purple lines show an inverted H&S pattern with 3.10 head, 3.55 neck line, so a 4.00 target which price ran towards. Price is now back kissing the neck line at 3.55 for a bounce or die decision. The indicators want to see a higher high in price so perhaps a bounce occurs, however, some price exploration in that 3.20-3.50 area is likely needed at some point forward. Note that price remains on an island after the gap down from 4.4 to 4.0 (light blue lines). So as price moves up over time and it prints at 4.0, the potential exists for price to launch immediately to 4.4 and higher creating an island reversal pattern but you can watch for that as the days and weeks play out.

All in all, for a place to park some dough for the long term, ARO is a possibility. It should proceed the same way forward like NFLX after its beating, or JCP, there are others. They are beaten down and left for dead but the charts set up with possie d and the recovery begins. RSH is a stock, however, that has not recovered. AEO and COH were also mentioned with the same set-up with ARO and they launch higher as well. AEO launched like a rocket. ARO, AEO and COH can all likely be held as long plays going forward for the months ahead and there are not many attractive longs in the market currently. Scaling-in at measured steps over the coming weeks will likely lead to success. 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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