The well-known American clothing brand and retailer that also markets other fashion accessories such as watches, jewelry, perfumes, and shoes, Guess Inc. (NYSE: GES) seems to be getting ready for a price bump according to the charts.
Bullish Move – Chart Indications
#1 Channel Breakout: As you can see from the daily chart of GES, the stock was trading within a channel for the past several weeks. This channel is marked as pink color lines. Guess had typically taken support at the lower rail of the channel before bouncing back again. The stock has currently broken out of the channel, which is a possible bullish sign.
Daily Chart – GES
#2 Trading Above MA: The stock is currently trading above its 50-day SMA, which implies that the bulls are currently gaining control.
[hana-code-insert name=’adsense-article’ /]#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#5 Bullish Stoch: The %K line is presently about to move above the %D line in stochastic.
This is a possible bullish sign.
#6 Double Bottom Pattern Breakout: As seen in the weekly chart, the stock had formed a double bottom pattern. This is marked in purple color. A double bottom pattern is a strong bullish pattern. A breakout from the pattern usually foretells the possibility of an upmove in the short term.
Weekly Chart – GES
#7 %K above %D: The stochastics reveal that the %K line is currently above the %D line in the weekly chart as well. This is a possible bullish sign.
#8 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is also a possible bullish sign.
#9 Bullish RSI: In the weekly chart, the RSI is above 50 and moving up, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GES is above the wick of the latest candle in the daily chart. This translates to a price of around $19.60.
TP: Our target prices are $25 and $30 in the next 3-6 months.
SL: To limit risk, place a stop loss below $17.50. Note that the stop loss is on a closing basis.
Our target potential upside is nearly 28% to 53% in the next 3-6 months.
For a risk of $2.10, our target rewards are $5.40 and $10.40. This is a 1:3 and 1:5 risk-reward trade.
In other words, this trade offers almost 3x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel and goes below it. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy trading!
Tara
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