Limited Brands Is Still Looking Good
Dragonfly Capital | Sep 24, 2015 01:02AM ET
Three weeks ago I noted in Is there an upper limit to Limited Brands stock? that L Brands Inc (NYSE:LB) was ready to move higher on the back of some Victoria Secret model wings. One week later it was up 9%. That was some flight! But since then the stock has not moved much, staying in a tight range. Are those wings just too tired? Or was it just a fantasy (bra). In fact the picture looks even better now.
Here are 5 reasons why this stock may have a lot more left in the tank.
1. The consolidation resembles a bull flag. Measured off of the August 24 bottom, a projected move higher out of the current consolidation would target 109. The volume is falling off, typical to the end of a bull flag as well.
2. The reversal higher out of the bullish Shark harmonic has reached the 88.6% retracement of the pattern. Typically this move, above the 61.8% level would continue on to at least a full retracement at 95.83.
3. The Death Cross from July 29 is reversing. This measure of when the 50 day SMA crosses down through the 200 day SMA has math in its favor to reverse to a Golden Cross shortly. For the next 30 days, even a flat price would drop rising values from the 200 day SMA and falling values from the 50 day SMA. It would not be the first time Death Cross has marked a bottom.
4. Relative Strength. The sis up 9% since the August low while the S&P 500, Russell 2000 and Nasdaq 100 are all quickly retracing to that low.
5. Momentum is still strong. The RSI is holding firmly in the bullish zone, and although the MACD is starting to roll over it is still strong positive. A reversal in price higher would reverse the MACD.
Of, course none of this means that Limited Brands will continue higher. But all of these indications followed by a a price trigger over 93.50 suggest owning the stock is the right course of action.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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