Abercrombie & Fitch (ANF) has put on an absolute clinic in momentum trading recently. Since November 24, culminating in Monday’s move, this retail strength has risen by more than 100%. To put this run in perspective, it was an amazing one-month vertical rally with only six red candles during the entire climb.
Looking at the technical aspects, Monday’s price action officially completed the bull flag movement measured at the $130.33 target set by the flag that formed in early December. After such a sharp rise, the stock appears to be in a state of overexpansion in the near term. From a tactical standpoint, ANF is expected to see either a healthy pullback or a period of sideways consolidation before it can realistically reach the next resistance level at $143.54.
If we see some profit taking, the first low to watch is $122.72. Below that we find much stronger support at $117.03. However, the most important area to watch is the old downtrend line, which is currently located around the $110.00 mark. How ANF reacts to this trend line will be the ultimate test; Holding this level is crucial if the bulls want to maintain this historical momentum against any near-term selling pressure.
