Coach (COH) – An old school short!

Coach beat Wall Street estimates as sales in China continue to boom, but shares sold off amid concerns about slowing North American growth. North American same-store sales rose 6.7% vs. the year earlier, down from 8.8% in the prior quarter and slightly below some estimates.

The luxury handbag and accessories maker said Tuesday that profit rose 24% to 77 cents per share, the third straight quarter of double-digit EPS growth. Analysts expected 75 cents. Sales increased 17% to $1.11 billion, just above estimates of $1.10 billion.

This leaves COH with a broken neck line on heavy volume – an old school move (head and shoulder). This kind of technical move signifies turnaround in a uptrend.  Even though the Asia-Pacific story of this stock is intact, temporarily there is a 10% downside. This trade’s risk to reward ratio is low. So short the stock.

  1. Initiate a short at $72.1
  2. Double it up at $73
  3. Set the stop-loss at $74.1
  4. Cover the short at $65.

Remember the stock as good support at $65-$66. See below. Good luck!

Advertisements