Huge Rallies Have These Two Apparel Retailers In Overbought Territory

One of the worst-hit industries last spring was the apparel retail group. When malls across America were shut down, traditional mall-based retailers were hit with a complete halt to in-person revenue. Some retailers were able to make up some of the lost revenue via digital sales, but in most cases, the digital sales were nowhere near enough to completely make up for the revenue lost.

While apparel retailers saw their stocks drop drastically in Q1 of 2020, most of them have also seen their stocks make incredible rallies over the past year. A number of them are up over 300% even 400% or more in some cases. This has put a number of stocks in overbought territory on different levels.

Earlier this week I was going through daily, weekly, and monthly charts for a number of different companies and different industries. When I started noticing the number of apparel retailers on the list of overbought stocks, I needed a way to narrow down the list. Using Tickeron’s fundamental analysis screener, I narrowed my focus down to two companies—American Eagle Outfitters (AEO) and Tapestry (TPR).

The reason these two stocks stood out was a combination of fundamental and technical factors. On the fundamental side, both American Eagle and Tapestry had four negative marks among the seven different categories. Both rank poorly in their Outlook ratings, their P/E Growth Ratings, and the Seasonality Score. American Eagle ranks poorly in the SMR rating and Tapestry ranks poorly in the Profit vs. Risk rating category.

AEO TPR FA Screen.jpg

The only positive mark for American Eagle is its Valuation rating. Tapestry gets two positive scores, the SMR Rating, and the Price Growth rating. The SMR rating is almost a neutral rating with a score of 33.

Tremendously Overbought Readings on the Monthly Charts

Both American Eagle and Tapestry experienced a little downturn in the last week or so and that brought both of the daily charts out of overbought territory, but they both remain in overbought territory on the weekly and monthly charts. The monthly charts are what really jumped out at me and told me exactly how overbought the stocks are, specifically the 10-month RSI and the monthly stochastic indicators.

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