The S&P 500 (SPX) has pulled back after reaching as high as 2,754.42 on February 16. It went as low as 2,697.77 on February 22 before bulls rushed and brought the index up to 2,747.76 on February 23. Last week’s price action may put the index’s bullish momentum in question. Unless the SPX can go higher than 2,754.42 this week, it is in danger of creating a bearish lower high setup.
While the index has yet to give us a clear direction, let’s focus on names that are near firm support levels.
KORS – Michael Kors Holdings Limited
Michael Kors Holdings Limited (KORS) is a world-renowned and award winning luxury fashion company. Established in 1981, it is famous for accessories, footwear, watches, jewelry, men’s and women’s ready-to-wear, eyewear, and a full line of fragrance products. Included in their portfolio is the designer/founder’s signature Michael Kors Collection and the MICHAEL Michael Kors labels distributed directly or through licensing partners in New York, Beverly Hills, Chicago, London, Milan, Paris, Munich, Istanbul, Dubai, Seoul, Tokyo, Hong Kong, Shanghai and Rio de Janeiro.
KORS lost its bullish steam in May 2014 when the stock generated a lower high of 98.96. The downtrend was confirmed when it broke below support of 80. Since then the stock created a series of lower highs and lower lows until it bottomed out in May 2017 at 32.38. In three years, the stock lost over 67% of its value. That’s why when bulls sensed that a bottom was in place, the stock quickly rallied.
Technical analysis show that KORS has broken out of a bullish reversal pattern when it breached resistance of 60. It even went as high as 69.95 on February 7, 2018, but the stock was in extreme overbought territory at this point. Bottom pickers dumped shares, and the stock responded by going as low as 56.21 this month. The important thing to notice here is that bulls defended the new support level of 60.
The strategy is to buy as close to the breakout point of 60 as possible. If bulls defend this level, the stock is likely to restart its uptrend and may hit our target of 85 in less than six months.
Weekly KORS Chart
Monthly KORS Chart
As of February 23 close, the Michael Kors Holdings Limited (KORS) stock is trading at 64.72.
Summary of Strategy
Buy: As close to 60 as possible.
Target: 85
Stop: A close below 56 negates this trade call.
MAA – Mid-America Apartment Communities Incorporated
Mid-America Apartment Communities Incorporated (MAA) is an S&P 500 company and the largest publicly-traded Real Estate Investment Trust (REIT) in the United States. Incorporated in 1993, it now owns around 100,000 apartments and 4 office buildings. Committed to a tradition of service and providing value to residents and shareholders, their communities can be found thriving throughout the Southeastern and Southwestern regions of the United States.
MAA ignited a bull run in October 2010 when it took resistance of 60. It was a long climb, but eventually, the stock went as high as 110.01 in July 2016. The stock flashed overbought readings at this point so it corrected and went as low as 85.04 in October 2016. After losing over 20% of its value in two months, the stock rallied, and reached 110.95 in June 2017. At this point, MAA has already established its range.
Technical analysis show that MAA is consolidating in a wide range between 85 and 110. Buying weakens when the stock touches 110, which makes it easy for bears to defend that resistance level. On the other hand, selling declines when MAA goes down to 85, making it easy for bulls to keep control of that support level.
The strategy is to use the classic buy the support and sell the resistance play. Buy as close to 85 and sell as close to 110. Recently, bulls have successfully defended 85, so the stock is most likely on its way to 110. The process may take about six months.
Weekly MAA Chart
Monthly MAA Chart
As of February 23 close, the Mid-America Apartment Communities Incorporated (MAA) stock is trading at 88.05.
Summary of Strategy
Buy: As close to 85 as possible.
Target: 110
Stop: A close below 83 negates this trade call.
Featured image courtesy of Shutterstock.
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