Back on DECK | The Mesh Report

Back on DECK

Christian Tharp, CMT August 24, 2011 0

It would seem that the market rally that started two weeks ago might still have some juice! So, after a nice move higher yesterday, a pullback could be in order.  That can be a great thing if you’re looking for the market to continue higher overall.  Pullbacks bring stocks down to previous levels and provide the trader with new entry points. One stock that I am watching for this type of opportunity would be DECK (Deckers Outdoor Corporation).

Deckers Outdoor Corporation (Deckers) is a designer, producer, marketer, and brand manager of footwear and accessories. Deckers sells its products, including accessories, such as handbags and outerwear, through domestic and international retailers, international distributors, and directly to end-user consumers, both domestically and internationally, through its websites, call centers, retail concept stores and retail outlet stores. Deckers market its products under two brands: UGG and Teva. UGG is a brand in luxury and comfort footwear and accessories, and Teva is a brand in multi-sport shoes, rugged outdoor footwear, and sport sandals. Deckers’ other brands include Simple, a line of sneakers and accessories; TSUBO, a line of casual footwear, and Ahnu, a line of outdoor footwear.

Please take a look at the 1-year chart of DECK (Deckers Outdoor Corporation) below with my added notations:

From December of last year up until now, DECK has had a very important level at $78. You can see the level act as support (green) back in December and January, and then again from March until earlier this month. In January and most recently, that same $78 also acted as a very short-term resistance (red). After briefly breaking that level of support a few days ago, DECK broke back above that level yesterday. If the market pulls back a bit today or tomorrow, DECK could come down to the $78 level for a support bounce and eventually make its way back up to the $90-95 area.


The Tale of the Tape: DECK has a very important level at $78. After falling below that level late last week, DECK has now broken back above that level and should be heading higher again.  Although a long trade could be entered around the whole dollar amount of $80, a pull back to the $78 level could provide a better, lower risk entry for a support bounce. A long position entered either way should include a stop below $78. A break back below $78 would negate the forecast for a move higher and a short position could be advised instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!


Good luck!

Christian Tharp, CMT

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