Abercrombie Soared On Q4 Earnings, But The Chart Still Shows A Buying Opportunity Ahead

Summary:

• Abercrombie & Fitch Co. ANF soared over 20 percent higher on Wednesday after posting earnings that beat Wall Street expectations.
• While the stock is likely heading even higher, we believe it is likely to pullback first.

Abercrombie & Fitch Stock Weekly Chart

The company reported earnings per share of $1.35 and total revenue of $1.15 billion, compared to analyst estimates of $1.2 and $1.13 billion. Management forecast annual sales to rise 2-4 percent, which also exceeded expectations. Further, the company is considering closing up to 40 stores, having already closed nearly 500 over the last eight years.

Our approach to projecting the price action combines analyzing the stock’s market cycles with traditional technical analysis. After reviewing the cycles for Abercrombie, it is likely still in the rising phase of its current cycle, approaching a brief corrective period in coming weeks.

The stock has now repaired itself, after making a double top and losing over 50 percent of its value. This rise suggests improved longer-term prospects. The intermediate cycles imply a brief pullback is likely over the next few weeks, which would likely be a buying opportunity, with a projection near $26.50 in coming months.

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