Few things are more frustrating for an investor than a missed
breakout, particularly when the stock goes on to post good
gains.
Patience is usually the best strategy after a miss. A stock
will often offer a secondary opportunity to buy shares, such as a
first or second trip to the 10-week moving average.
Women's apparel and accessories retailerChico's FAS (
CHS
) started forming a long cup with handle beginning in late July
2011. The buy point in the handle was 16.17. The breakout came
about 13 months later in volume 76% above average.
The base was stage one, according to MarketSmith's pattern
recognition technology. A first- or second-stage base is more
likely to work than a later stage base.
Aggressive investors could've spotted an earlier entry in a
consolidation within the larger pattern. This would've offered a
handle entry at 15.51. The stock cleared that buy point intraday
on July 30 in 56% greater volume.
In both cases, the stock posted a gain of 20% to 25%, leaving
behind those who missed the breakouts.
Now, however, a new opportunity could be about to emerge.
Chico's declined from its recent high and is back at its
10-week line. Volume during the decline was increasingly quiet --
exactly what bulls want to see.
To establish a new buy zone, Chico's would have to bounce off
the 10-week line in strong volume.
Earnings grew to 44 cents a share in 2010 vs. the year-ago
loss of 2 cents a share. In 2011, EPS jumped 50% and last year
27%.
Revenue increased 8%, 11% and 15% in the same periods.
The Street expects EPS to advance 26% in the fiscal year
ending in January. Revenue growth is pegged at 18%, which would
be the fastest growth in seven years.
Chico's FAS paid its first dividend ever in March 2010. Since
then, the annualized payout has increased by almost a third. The
current dividend yield is 1.2%.
The company operates under four brands -- Chico's, White House
Black Market, Soma Intimates and Boston Proper -- aiming at women
30 and up. The company has more than 1,250 stores and outlets in
the U.S., Puerto Rico and Virgin Islands.