On March 10th, I posted a trade entry setup on the Seasonal Forecaster website for Skechers (SKX), the footwear manufacturer and retailer. After a nice run-up in early 2014, SKX consolidated sideways and managed to ignore the October selloff in the major indexes.
I saw a nice breakout from the consolidation, and a re-test of the former resistance, now support level:
At the time, the company had a strong track record of revenue and earnings growth:
But the reason I was watching the stock was the strong seasonal pattern it had for mid-March – an average 24.1% gain over the next 7 weeks, with gains in 12 out of the past 15 years:
We got in at 66.90 on March 11th. Finally, on May 13th, I said “SKX is overextended and ripe for a pullback. We have a really good profit in SKX right now (it's up 48% from the 3/10/2015 entry). Let's take our profit. We can always consider reentry on any pullbacks.“
We exited the stock position with a 48.6% gain. The July 60 call I had offered as an alternative trade was up 318%. Nice gains for two months.
I closed that trade out saying “We can always consider reentry on any pullbacks.” It turns out SKX wasn't done. SKX gained as much as 65% more after our exit, although volume was falling off:
SKX quickly rebounded after the August sell-off, and is now consolidating and riding the 50-day moving average.
So is this a good time to consider “reentry on a pullback”? After all, the company is still in a strong position. Investor's Business Daily's Stock Spotlight on September 17 (subscription may be required) focused on Skechers and started off saying “It's hard to say anything bad about Skechers USA”. It goes on to say that Skechers is climbing the right side of a consolidation that appears to be a new base. So again, is it time to consider re-entering a long stock or option position in SKX?
The basic concern for me right now is Skecher's seasonal chart. For whatever reasons, SKX has a strong tendency to sell off over the next 7 weeks, with an average loss of 10.8%, and losses in 13 out of 16 years:
And those aren't little 2% declines. Look how many have been double-digit losses.
Sixteen years of track record that shows mostly double-digit losses over the next two months is a warning to me. Especially with the rest of the market in a correction, I will not be considering any position in Skechers for a while.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2015 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com.
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