(This article was published on TheStreet.com on Tuesday morning.)
PVH Corporation (PVH) markets a wide variety of its own clothing line as well as branded apparel and accessories. Its stock price rallied more than 75% in the first three quarters of 2016, but began pulling back in October that year, retracing 62% of that gain by February 2017. The accompanying Fibonacci retracement levels of the 2016 range have defined important levels of support/resistance and have defined an inverse head-and-shoulders basing formation. The 50% retracement level at $90.00 delineated the left and right shoulders, the 62% level marked the head in the $85.00 area, and the neckline at $95.95 is defined by the 38% Fibonacci retracement level. A confirmed break above neckline resistance projects a pattern price target equal to the height of the pattern in the $107.50 area, or about a 13% gain from current levels.
Daily moving convergence/divergence is overlaid on a weekly histogram of the oscillator and has crossed above its center line on both timeframes. The daily reading reflects positive short-term momentum and the weekly histogram crossover reflects intermediate-term trend. Early last year, the weekly histogram moved above its center line and it signaled the start of the rally that year, the move back below the center line in October signaled the start of the 62% retracement period, so the current bullish crossover is technically significant. Chaikin money flow has been oscillating in a narrow range around its center line, but the money flow index, a volume-weighted relative strength measure, has crossed above its 21-period average and center line. A base has been made and the technical indications support a breakout. PVH is a buy after an upper candle close that penetrates the base neckline, using a trailing percentage stop.