Ascena Retail Group (ASNA) is a retailer that sells a number of brands with different price points, qualities and sizes for office, home, and weekend. In the mercurial world of fashion, things can change on a dime, so let's hurry up and look at the charts.
Retail has had a hard go of it lately, battling online shopping, slim and shrinking margins, fickle shoppers, currency swings and everything else under the sun. In this daily chart of ASNA, above, we can see that the share price has been in a downtrend for the past 12 months (and longer).
The 50-day moving average has been in a negative trend for most of that time, and the 200-day average resumed its downward slope in December. The On-Balance-Volume (OBV) line has had a bearish pattern most of the time, turning more sideways since February. If we look closer at the OBV line, we can see some improvement in February and March. The Moving Average Convergence Divergence (MACD) oscillator in the bottom panel has narrowed to a cover-shorts buy signal -- light at the end of the tunnel.
In this weekly chart of ASNA, above, we can see that despite periodic rallies, the price of ASNA has trended lower over the past three years. Prices are below the declining, 40-week moving average line.
Two clues on this chart suggest that ASNA could rally in the weeks ahead. First, the weekly OBV line is not back to its February low, even though prices are. This suggests that the buying in February and March has not been sold back or liquidated. Second, the 12-week momentum study shows a deep low in January, but a much shallower low now -- even though prices are roughly back to the same level.
This difference is known as a bullish divergence. Said another way, the November-to-February decline was different than the April-to-May decline. The slower momentum reading on the second decline means that someone bought shares of ASNA on the decline, and the pace of the decline slowed.
Bottom line: If you happen to be short ASNA, I would cover now. No position? I would buy ASNA on a weekly close above $7.50 and risk to $6.20, a new low. If you can write puts on ASNA, I would take that route too.