How to Trade Abercrombie & Fitch After Its Strong Earnings Beat

Youth apparel manufacturer and retailer Abercrombie & Fitch (ANF)  was charging higher in early Wednesday trading after reporting a top line and bottom line beat. Let's check out the charts and indicators for the short-term and longer-term possibilities.

In this daily bar chart of ANF, below, I can see the price action through Tuesday's close and need to imagine that prices are trading around $4 higher and near $27. This would put prices well above the 50-day moving average line. I can see that prices have been successfully testing the rising 200-day moving average line during May.

The daily trading histogram is neutral but the On-Balance-Volume (OBV) line has been trending lower the past four months suggesting that traders have been more aggressive sellers of ANF. The Moving Average Convergence Divergence (MACD) oscillator looks like it has bottomed in March and May and could move higher towards the zero line. 

In this weekly Japanese candlestick chart of ANF, below, I see a mixed picture. Prices have been holding/testing the rising 40-week moving average line in May. The weekly OBV line shows weakness from February. The MACD oscillator has been correcting lower but still stands above the zero line. 

In this daily Point and Figure chart of ANF, below, I can see that the software is projecting a downside price target in the $21 area. A trade this morning above $24.68 is going to greatly improve this picture and probably generate an upside price target. 

In this second Point and Figure chart of ANF, below, I used weekly close only price data. Here the software suggests a price target of $62. 

Bottom line strategy: I am not sure I would chase ANF right yet. This early strength in ANF could be short covering and I would prefer to wait for an intraday dip or even a one-day pullback before recommending purchases.

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