In his first Executive Decision segment of "Mad Money" Tuesday, Jim Cramer spoke with Katrina Lake, CEO of online apparel service Stitch Fix Inc. (SFIX) . The company just reported a top- and bottom-line miss.
Lake explained that the primary challenge for the quarter was keeping warehouses open and at capacity in a safe manner. Lake said it's true that the pandemic caused many shoppers to turn online for their purchases, but apparel sales plunged 80% as shoppers don't buy clothes when they have nowhere to go.
Lake commented on Stitch Fix's recent decision to lay off 1,400 workers in California. She said it was a difficult and painful decision, but the cost differential between California and practically anywhere else was too high to justify.
Let's check out the charts.
In this daily bar chart of SFIX, below, we can see that prices have been in a sideways to lower trend for the past 12 months. SFIX gapped lower on Tuesday but is still above the rising 50-day moving average line and rising 200-day line. The On-Balance-Volume (OBV) line moved up from the March low to tell us that buyers of SFIX were being more aggressive, but the OBV line looks like it has now reversed direction. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take profits sell signal.
In this weekly bar chart of SFIX, below, we can see that prices have been in a downtrend longer than what the daily chart shows. Prices are above the rising 40-week moving average line, but that could change quickly. The movement of the weekly OBV line is interesting in that it has been rising since December 2018. With prices in a downtrend it makes me wonder why buyers of SFIX would need to get aggressive to accumulate shares. The MACD oscillator has crossed to the upside for a cover shorts buy signal.
In this daily Point and Figure chart of SFIX, below, we can see that the software is projecting a possible downside price target in the $20 area.
Bottom line strategy: While everyone is anxiously awaiting a return to a more normal life we have no idea of whether a "second wave" of Covid-19 is possible and what that could do to businesses trying to get to the other side, so to speak. With the Point and Figure chart suggesting a decline to $20 and the daily bar chart not showing much support until the $18 area, I would stand aside from any long positions on SFIX.
