Is there an upper limit to Limited Brands stock?

• Posted by Greg Harmon
• on September 2nd, 2015

Quality fashion is the key to Limited Brands success. And maybe a little bit of old fashioned marketing. Oh and having Taylor Swift bring attention to one of your most popular brands might add a bit. The point is that Limited Brands ($LB) has locked up the demographics they are serving. Whether you like it or not teen and millenial girls cannot get enough of Victoria’s Secret. Frankly as the father of a young girl I am not sure Victoria has any secrets left.

What interests me more is the chart of the stock price. It had a brief (pun intended) run higher to start the year before a double top action turned the price back lower. The market low on August 24th marked a bottom for Limited Brands as well and it has been moving higher since. In fact that day marked a terminal Price Bar at the Potential Reversal Zone of the bullish Shark harmonic.

I know, not your typical cocktail party market talk. What that means is a pattern played out and the reversal signal triggered. So far it has seen 13% upside. But are future returns limited (pun intended again)? There are several pieces of data in the chart that suggest not.

The first is the Golden Cross. The opposite of the Death Crosses you have been reading about, this one is when the 50 day SMA crosses up through the 200 day SMA and is a broad scale bullish signal. Next, the target on the reversal from that Shark pattern looks for a retracement now of 61.8% of the pattern, or to 87.86. The wedge that has been building since early July looks likely to be tested again, and push over the top would look for a move to 95. Finally the momentum indicators are both rising and in the bullish zone, supporting more upside price action.

I cannot tell you how far this stock will go, but maybe the future has some of those Victoria’s Secret Angel wings and is not limited.

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