The market situation has a lot to do with how a stock
About three weeks ago,
discussed women's apparel and accessories retailerChico's FAS (
The market was in a confirmed uptrend, and Chico's had
returned to its 10-week moving average for the first time after
its August breakout.
The 10-week line can sometimes serve as a secondary buy
Volume was soft during the fall to the 10-week line, exactly
what bulls want to see. The same morning that IBD's story came
out, Chico's bounced off the 10-week area in volume 37% above
Let's say an investor bought shares at the noon price of
18.45. The stock rose modestly the next two sessions.
However, on Oct. 9, IBD's Market Pulse changed its market
outlook to uptrend under pressure. On Oct. 10, the Pulse switched
Chico's returned to its 10-week line in soft trade, slipping
as much as 3% under the hypothetical entry. The stock bounced off
the line in weak volume last week but fell back to the 10-week
Market corrections do that to stocks, even fundamentally
None of this action constituted a sell signal. Thanks to the
modest moves and soft trade, you might regard the action as
Something new emerged out of all this action around the
10-week line. Chico's is now working on the seventh week of a
stage two, flat base. The stock could be setting up for something
If the market returns to a confirmed uptrend and the base is
still intact, Chico's has a shot at a valid breakout.
Should that happen, aggressive buying would be more
appropriate than what might be done in a secondary buy range.
Yet, if the stock breaks out during this correction, the
prudent investor will stay on the sidelines. The odds are not
good for any stock during a correction.
Chico's FAS has strong fundamentals. The EPS Rating is 95,
putting it in the top 5 percentile. Sales + Profit Margins + ROE
is an A.
The company has paid a dividend since March 2010. The
annualized yield is 1.1%.