Chico's Fas (CHS) seems to have a loyal following for its clothes, jewelry and accessories. But what does CHS look like as far as an investment? Could investors be changing their minds?
If you know that CHS is a retailer, then you probably won't be surprised by this daily chart, above. Like many names in this industry, the share price has been in a downtrend the past year. Prices made a good upside bounce in February, including an upside gap with a surge in volume. This volume spike kick-started a rally in the On-Balance-Volume (OBV) line. Prices have given back more than half of the February rally, but the OBV line has held onto the bulk of its gains, which tells us the longs are staying put.
Prices are below the declining 50-day and 200-day moving averages, but we know that moving averages are late by definition. In the bottom panel of this chart is the Moving Average Convergence Divergence (MACD) oscillator. This trend-following indicator looks like it is narrowing towards a "cover shorts" buy signal.
This weekly chart of CHS, above, gives us a couple of positive clues to work with. Prices are below the declining 40-week moving average line, but did test that line in the first quarter. The $14 level was support on CHS in 2014 and 2015. As prices broke below $14 in the latter half of 2015, the role of support reversed to the role of resistance and the rally this year stopped just below it.
Unlike the daily OBV line (noted above), the weekly version had a small bump up in February that has disappeared. The weekly momentum picture may be the strongest signal on this timeframe as we see a bullish divergence from December to now, with a much shallower reading than in December.
Strategy: aggressive traders could go long CHS at current levels, risking a close below $9.50. Closes above $13 and $14 warrant increased exposure.