Can L Brands Break Out of Retail Rut?

L Brands (LB), better known for the name brands Victoria's Secret and Bath & Body Works, will try to buck the disappointing trend in retail earnings this quarter. The options market is pricing in a move of a little more than 4.6% this week, although this would be in stark contrast to past moves. While I'm not interested in playing this stock into the numbers, the chart is set up so that if there is a disappointing report or guidance, a downside play may be at hand post-earnings.

The current setup on the daily chart makes this a tough one to hold unhedged into earnings. The stock has made a nice bounce since the August bottom, but after a failed breakout in late October, an island top grouping has been in play. One could argue there is a bearish head-and-shoulders pattern as well here, although I would just keep my focus on the $90 support level. Should we see price fail to hold, at the very least I believe we fill the September gap over the next week or two and trade down to $85.

The bearish crossover of the 10-day simple moving average (SMA) under the 50-day SMA has me concerned here as well. The stock performed so well with the bullish crossover that one has to wonder if it will perform just as poorly with a bearish crossover. There's no strength in the longer-term trend or momentum here as well as the Relative Strength Index is putting in a bearish divergence here hitting a new low. Ultimately, I think we would see this one trade as low as $80 to $82.

A simple push back over $93.50 would get the bears back on track. As I mentioned previously, this hasn't been a big mover recently around earnings, so for option players, I see iron condors as a decent risk-reward if you must have something into earnings. I would prefer to see the initial reaction and play the downside if we get a move lower and a break of $89 intraday or a close under $90. I'm really not looking to make an upside play as the overall chart just isn't strong enough for me with the current setup on the secondary technical indicators.

At the time of publication, Collins had no positions in the stocks mentioned.