I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
4,121 Blog Posts

Sexy American Reentry

I’ve been a longtime fan of American Apparel and their simple design concepts.  Their marketing has consistently been edgy to the point of going viral and occasionally being saddled with lawsuits.  The company has spent the major part of the last two years clinging onto solvency and the stock price has reflected that, sustaining trade below $1.00.

Distressed situations require heavy due diligence for an investor and aren’t for everyone.  However led by the flamboyant Dov Cheny, the management team has continued to tread forward.  Fundamental analysis is not one of my strengths, but the sheer panache of the management team paired with strong and sexy branding keeps the stock on my radar at all times.

At the beginning of August, APP began showing signs of life.  Since then the stock has gained momentum to the upside.  It broke free from a multi-month consolidation and retuned to $1.70 where again we saw supply enter and slow price.  Check out the action on the weekly chart:

On a daily timeframe, we see the power behind the breakout.  If you recall, the retail sector as whole had a strong thrust over the last few months.  Check out XLY’s chart showing strong demand in the consumer discretionary space since the beginning of August.  APP participated, and since finding resistance, has pulled back.  What I want to see is how we trade at the $1.30 level.  Today, the stock is reacting positively to some good same store sales reporting and a healthy demand for retail stocks.

I’m long since the $1.00 roll, and considering adding more.  I’ll be very patient with my add and may miss the opportunity, but I implore you to keep the name on your radar. As always, following @twosmuth on twitter will make you the first to know when I’m buying.

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