Signal Says Avoid This Luxury Retail Stock

Retail stock Tapestry Inc (NYSE:TPR) -- which owns luxury fashion brands Coach, Kate spade, among others -- has executed quite the V-shaped rally on the charts in the last nine months. The shares hit an annual low of $25.99 on Nov. 1, only to bounce back in three months and score a two-year high of $48.80 on Feb. 23. Now battling its year-over-year breakeven level, TPR is entering a historically bearish month.

The stock appeared on Schaeffer's Senior Quantitative Analyst Rocky White's list of 25 worst S&P 500 Index (SPX) stocks in May in the last decade. TPR averaged a 4.3% loss for the month, finishing positive only twice out of those 10 years.

 

From the equity's current perch at $40.22, that would mean a move down to roughly $38.50 and below the 12-month breakeven level. Amid a 15% drawdown this quarter, the shares have breached their 100-day moving average, and are now testing the 120-day trendline. The 10% year-to-date level also stands out as potential resistance going forward.

Despite the middling performance, 13 of the 19 brokerages in coverage maintain "buy" or better ratings, with zero "holds" on the books. And with a slim 2.7% of the stock's total available float sold short, there's plenty of room aboard the bearish bandwagon.

The security looks to be a good target for premium buyers,, based on its Schaeffer's Volatility Scorecard (SVS) of 95 (out of 100). In other words, the shares have regularly made bigger moves than options traders were pricing in during the last 12 months.