L Brands Inc. (LB) lost its elastic bull shape in the fall of 2015 and prices have been soft ever since. Even though prices have been reduced from $100 to just $35, the technical outlook for this retailer is not positive. Let's check to see how the charts and indicators look in the mirror of the fitting room this morning.
In this daily bar chart of LB, above, we can see a clear patter of lower lows and lower highs for the past 12 months -- the definition of a downtrend. Prices have spent most of the time below the declining 50-day moving average line as well as the slower-to-react 200-day line. Except for a pickup in April, May and June, the On-Balance-Volume (OBV) line has been pointed down, suggesting that sellers of LB have been more aggressive. In July and August we start to see a bullish divergence between the higher lows from the momentum study and the lower price lows. This two-month divergence may not be long enough to justify much of a rally.
In this weekly bar chart of LB, above, we can see three legs to the downside. The first decline is from $100 to $60. The second decline is from $80 to $45 and the current and third decline started around $55. These three sell-offs may be enough to make the stock attractive to longer-term investors, but we have yet to see prices stabilize and begin any bottoming action. The weekly OBV line has been in downtrend since early 2015 and does not show any accumulation. There is a bullish divergence between the 12-week momentum study (lower panel) and the price action, but momentum is not a very good timing tool.
In this Point and Figure chart of LB, above, we can see both a long rally and a long decline. Prices are back to an old support area, but "old" is the key word as this zone of previous consolidation may not be meaningful to traders now. The chart also shows a potential long-term price target in the $18 area.
Bottom line: LB has been in a long-term downtrend and there are no strong signs that it has ended yet. This is probably not the time to try to pick a bottom.