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Today’s Trading Edge: Abercrombie & Fitch shares shrug off Q4 earnings and focus on improving outlook

Posted by WorldWideMarkets . on Mar 2, 2017 8:30:01 PM

WWM ANF MAR 2 2017.jpg 

Abercrombie & Fitch Co (AFN) shares surged 13.94% following the company’s earnings miss and improving outlook for 2017.  The apparel retailer recorded earnings of $0.71 a share, a 5 cent miss from the analysts’ estimates of $0.76.  Revenue fell 6.8% to $1.04 billion compared to a year ago, and was a miss of the eyed $1.05 billion estimate.  The company also guided Comparable sales to improve for the full year, but to remain challenging for the first half, with Hollister, its largest brand, expected to maintain or improve its comparable sales trend and Abercrombie to improve throughout the year.   

The company is targeting capital expenditures to be approximately $100 million for fiscal 2017. Capital expenditures are expected to include approximately $70 million for store updates and new stores and approximately $20 million for direct-to-consumer and omnichannel and information technology investments to support growth. . 

CEO Horowitz noted, “While overall results did not meet expectations, 2016 was a year of significant progress on each of our strategic priorities. We continued to proactively respond to the evolving retail landscape through our store closure and channel optimization initiatives.”

Price action on the ANF daily chart shows the bearish trend remains intact unless price can recapture the 200-day SMA.  Today’s surge tentatively formed a bearish Gartley pattern.  Point D is targeted with the 50.0% Fibonacci retracement level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move.  If the Gartley reversal continues, key support may come from the $12.70 level.  If the bearish reversal accelerates and breaks of the psychological $13.00 handle, further momentum could target the $12.50 level, followed by the $11.93 level. 

If we see bullish momentum return, key resistance will come from $15.00 level.  With major resistance coming from the noted 200-day SMA, which currently trades at the $16.51 level. 

The Trade: Buy ANF at $12.75, with a stop loss at $12.25 and a take profit at $14.25.  The Risk/Reward Ratio is 1:3

Topics: Equities Market, Stocks, US Stocks, US equities


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