The United States clothing company that specializes in high-end clothing and apparel, Oxford Industries Inc. (NYSE: OXM) seems to be ready for a price correction in the near term according to its latest charts.
Bearish Indications
#1 Rising Wedge Pattern: The daily chart shows that the stock has been forming a rising wedge pattern during the past few weeks. This is a bearish pattern and is marked in pink color in the daily chart. The stock has currently broken down from this rising wedge pattern. This has the potential to move lower in the near-term.
Daily Chart – OXM
#2 Overbought RSI moving down: The daily chart shows that the RSI is moving down after reaching near overbought levels. This indicates the stock may move lower.
[hana-code-insert name=’adsense-article’ /] #3 Bearish Aroon: The Aroon indicator shows bearishness as the Aroon up is below 30 and the Aroon down is above 70.#4 CCI Moving Down: The CCI is currently moving down from overbought levels.
This usually means that the stock may reverse to downside soon.
#5 %K below %D: The %K line of the stochastic is currently below the %D line, indicating bearishness.
#6 Bearish Divergence between RSI and Price: The weekly chart shows that there is a bearish divergence between RSI and price.
This is marked as blue dotted lines. While the price was making higher highs, RSI was forming lower highs. This is a possible bearish sign.
Weekly Chart – OXM
#7 Overbought CCI moving down: CCI is currently moving down in the weekly chart after reaching overbought levels, indicating bearishness.
#8 %K below %D: In the weekly chart as well, the %K line of the stochastic is currently below the %D line, indicating bearishness.
#9 Supply Area: The stock is also near a supply area. This area is marked as a red rectangle. After forming a long-tailed bearish candle, the stock was not able to cross above this level since then. This is a bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for OXM is at the current price of around $93.55.
TP: Our target prices are $80 and if it closes below the 200-week SMA, $70.
SL: To limit risk, place a stop loss at $97.70. Note that this stop loss is on a closing basis.
Our target potential downside is 14% to 25% in the next 3-6 months. For a risk of $4.15, our target rewards are $13.55 and $23.55. This is a nearly 1:3 and 1:6 risk-reward trade.
In other words, this trade offers nearly 3x to 6x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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