Liz Claiborne – A Singularity in Retail Stocks

• Posted by Greg Harmon
• on September 6th, 2011

Browsing through the retail racks looks like the mess you see at the end of a 75% off sale at a hot brand. Carnage everywhere. It seems it will take a long time to clean up and repair the store. This is true from the teen retailers to the department stores to women’s wear. Look at the chart for Aeropostale, $ARO, below. After falling out of the symmetrical triangle in April and falling to the 18 area it has since taken another nose dive lower to 12 where it consolidated briefly before moving lower again. Printing a new low today, it still has a Moving Average Convergence Divergence

(MACD) indicator that is falling and a Relative Strength Index (RSI) that has fallen and can’t get up. These support more downside in the future. Using 11 as a stop, you can short this with a target of 4-5. This is the worst of the teen retailers but, the charts for American Eagle Outfitters, $AEO, Abercrombie & Fitch, $ANF, Buckle Inc, $BKE and Zumiez, $ZUMZ are nothing to write home about.

The big department stores area little better but also have some work to do. Look at Nordstrom, $JWN, below. It fond support at the 61.8% Fibonacci retracement of the move higher from September 2010 to July 2011 and bounced back to the 23.6% Fibonacci level before falling back by 50% of the August move higher Tuesday, near 41.69. To get excited about this stock it

would need to get over the 46.25 level and then you could look for a move toward resistance at 49 and the previous high at 51.89. Until then just watch. Dilliards, $DDS, Saks, $SKS, and Macy’s, $M all have similar charts.

Finally moving on to women’s wear is where you find an anomaly. Sure there are crappy looking women’s clothing stocks like Talbots, $TLB, but Liz Claiborne, $LIZ, looks very different. After

the two step fall that began in early August, it has moved straight up and is now testing the bottom of the resistance zone between 5.57 and 6.00. AS it arrives there the RSI is sloping and trending higher and the MACD is continuing to increase, both supporting more upside. The 16 cents to get through to resistance at the middle of the channel and then 43 cents to the top may not seem like much but they represent moves of 2.9% and 7.7% respectively. You could get long this stock on a move over 5.57, using 5.51 then as a stop, for the move through the channel.

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