Tailored Brands Stock Could Be Set to Bounce

TLRD could also benefit from a short squeeze

Managing Editor
Jul 9, 2018 at 11:57 AM
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Retail name Tailored Brands Inc (NYSE:TLRD) was an outperformer until its mid-May annual peak, but has since retreated back to a key trendline. And although the Men's Warehouse parent is down 0.5% to trade at $25.08 today, the stock's recent pullback could be a prime buying opportunity, if history is any guide.

TLRD had been climbing the charts since mid-August, but recently suffered a post-earnings bear gap on June 14. Since then, the shares have struggled to surpass the $28 level, but may have found a level of support in the $25-$26 range, which is also home to a 38.2% Fibonacci retracement of the stock's rally from its 2017 lows to its May highs.

Per Schaeffer's Senior Quantitative Analyst Rocky White, Tailored Brands stock has pulled back to within one standard deviation of its 160-day moving average in the past week of trading. There has been one other time over the last three years where TLRD has pulled back to this trendline after trading above it for a significant length of time. Following this prior signal, the stock went on to gain 21.71% over the next month. 

Daily Chart of TLRD With Fib Levels2

A short squeeze could also provide more fuel for a TLRD rally. Short interest fell during the past two reporting periods, yet the 6.05 million shares sold short still represent 12.4% of the stock's total available float.

Traders looking to speculate on the equity's short-term price action may want to do so via call options, which are attractively priced at the moment, from a volatility perspective. TLRD sports a Schaeffer's Volatility Index (SVI) of 43%, which ranks in the 1st annual percentile. This low ranking indicates that front-month options have rarely priced in lower volatility expectations in the past year.

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