Company Description:
Guess?, Inc. designs, markets, distributes and licenses lifestyle collections of casual apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. The company's apparel is marketed under numerous trademarks including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, GUESS? and Triangle Design, Question Mark and Triangle Design, BRAND G, a stylized G, GUESS Kids, Baby GUESS and GUESS Collection. The lines include full collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets and knitwear. GES also selectively grants licenses to manufacture and distribute a broad range of products that complement its apparel lines, including eyewear, watches, handbags, footwear, children's and infants' apparel and other fashion accessories.
Why we like it:
With Wal-Mart acting particularly weak in recent weeks, it is really no great secret that Retailers are starting to lose strength. As much can be seen on the chart of the Retail index (RLX.X), which has been unable to get with the bullish program of the overall market, ending the year well below its November highs. Compared to shares of GES though, the RLX looks positively robust. GES began to weaken in early November, and its trading pattern suggests a big breakdown is coming soon. The early December high represented a lower high and the dip below the $12 level over the past two days has produced a lower low relative to late November. More importantly, last week say the stock break below the 50-dma ($13.25) for the first time since mid-August, but the contrast this time around is that the 50-dma has now assumed a negative slope (for the first time since April) and the 20-dma ($13.32) is about to cross below the 50-dma.
Once below $12, an argument can be made for support coming in near $11, also the site of the 100-dma. But the more realistic target appears to be $10 and that will be our price objective for the play. Note that the PnF chart just gave a fresh Sell signal with the trade at $12 and that gives the bears a tentative target of $8.50. We'll use a trigger at $11.80, just under the past two day's intraday lows. That ought to keep us from entering just before a rebound. Momentum traders can enter on the initial break, but with the bullish bias in the market, conservative traders should be able to snag a better entry on a failed bounce below strong resistance at $12.75. Set initial stops at $13.40), just above the pending convergence of the 20-dma and 50-dma.
Annotated Chart of GES:
