Trading Deckers Outdoors vs Croc’s

• Posted by Greg Harmon
• on September 22nd, 2014

You might think that it is a no brainer trade to suggest buying Deckers Outdoors ($DECK) and selling short Croc’s ($CROX) as the calendar turns from Summer to Fall. Putting away your flip flops and pulling out the Uggs. And I would agree. It is for traders with no brain. Well maybe that is a bit too harsh. But this pairs trade is extended and you are late to the party if looking at it now. In fact…..

….the chart above shows the the relative price action of the two stocks. There has been a subtle up slope since March, but it became very steep in September. So steep that the ratio is now 27% above the 50 day moving average and the RSI is nearly at 90, extremely overbought. An old trader adage is that something overbought can keep getting more overbought, and this could be the case with this pair. But at this extreme is is worth keeping on your radar for a signal of a turn back lower for a mean reversion trade.

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