Coach (COH)
— Like most assets classes and stocks, this luxury handbag and
accessories maker rallied hard off the 2009 lows. Unlike the broader
market, however, the stock rallied into a medium-term blow-off top in
March 2012. From there, after a too-steep-to-be-sustainable slope, the
stock slipped a good 40% over the course of five months, retesting the
lower end of a support line again in February 2013.
Another
way of looking at the price action off the July 2011 reaction high, or
the end of the steep rally off the 2009 lows, is to mark the vertical
leap in the first quarter of 2012 as merely a dramatic overshooting out
of a longer-standing consolidation phase. In other words, this
consolidation phase began in July 2011 and lasts through the present. We
can therefore also draw a line from the July 2011 highs to connect the
dots, which puts COH exactly at key resistance right here and now (upper
blue line on the chart above).
Click to Enlarge
The daily chart reveals another consolidation phase with a tight
pattern. After the stock gapped up on April 23, following its latest
earnings announcement, it rallied higher for about a month. However,
through a multi-month lens, COH ultimately settled into a consolidation
phase.
After the stock’s latest rally off the June lows, it has worked
itself back to the top of this range and is very close to breaking to a
new year-to-date high, which could quickly lift COH 5% or more.
Despite the broader market’s seriously overbought readings,
individual stocks developing tight patterns for breakouts continue to be
found if one is willing to do a little digging. At this stage the trade
I see setting up in COH is purely a breakout play rather than a level
to initiate longer-term holdings.
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