Teen Retailers Looking to Turn First

• Posted by Greg Harmon
• on June 13th, 2011

As they reported earnings and same store sales over the last few weeks the stock price of the teen retailers Abercrombie and Fitch ($ANF), Aeropostale ($ARO), American Eagle Outfitters ($AEO) and Zumiez ($ZUMZ) each got pummeled dropping between 15 and over 30%. Almost like the characteristics of their pubescent client rubbed off on them and they just tripped and fell off the curb while walking. Aeropostale and American Eagle Outfitters twice! But they are showing signs that they are getting up off the street ready to try again. Maybe they can lead the market back higher. The worst two are looking the best. Look at the technical analysis.

Aeropostale, ARO

The chart for Aeropostale shows too large gap down moves since May. But with a technically oversold Relative Strength Index (RSI) down at 23.33 and a Moving Average Convergence Divergence (MACD) indicator that has just crossed positive it may be ready to move back higher. Price has been consolidating so look for a move back over 17.80 as a signal for a long entry to a target of 19.25 and then a gap fill up to 20.50.

American Eagle Outfitters, AEO

American Eagle Outfitters is basing over 12.60 after a second fall. It also has a technically oversold RSI and a MACD that is crossed higher, signaling a potential upside move. The long entry signal is a move over 13 for a run to resistance at 13.50 and then gap at 14.11.

The other two charts are note quite as ready but may get a sympathy move along with Aeropostale and American Eagle Outfitters.

Abercrombie & Fitch, ANF

Abercrombie & Fitch is basing with an RSI near technically oversold but its MACD is not ready to cross. In fact it is still growing more negative. But if were to get a sympathy bounce higher above 67 then it could back up to resistance at 70 and then 72.48 beyond.

Zumiez, ZUMZ

Zumiez is in the same boat as Abercrombie & Fitch. It is basing with an RSI near oversold and a MACD that is far from a positive cross. But again a sympathy pop over 23 could get it back on track toward 24 and 26.25 on a run higher.

These are counter-trend plays so they may take some time to develop. Watch Aeropostale and American Eagle Outfitters for the first move and wait for confirmation above the levels listed before entering.

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