While insider selling or buying is a not a definitive buy or sell or indicator, it can provide insight into what insiders think the prospects of the company are going forward. Insider sales are especially interesting because if the insider thought the stock would keep rising it is unlikely they would sell their shares at the current price. On March 21 and March 22 more than $100 million worth of stock was sold by a DSW Inc. (NYSE:DSW) insider. Combining this information with the technical outlook of the stock provides a more complete picture on how likely it is that the apparel store, DSW Inc., will continue to rise in price. While overall the apparel space is doing very well this year, this stock and several others in the industry have been showing signs that maybe this insider knew what he was doing.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

DSW Inc. has a good run to upside year, sporting roughly a 23% gain YTD. Throughout late February and March the stock has been stagnant, moving sideways while the S&P 500 SPDRS (ARCA:SPY) ETF has rather relentlessly forged new highs during that time. With the stock unable to move higher even while a significant portion of stocks have been moving higher over the last month, the insider transaction seems well timed and alerts to potential danger. If the stock stops moving higher while being pushed by the market, and if the market sees a decline there is likely to be very little buying support left in DSW Inc. Currently the stock is range-bound between approximately $57.06 and $52.80. A drop below $52.80 confirms a downside move with an initial target of about $49. The sharp decline in on-balance volume recently supports the theory that the stock could weaken going forward. On the other hand, a close above $57 would trigger a range breakout, which has the potential to move the stock to $60 to $61.

SEE: Insider Selling Isn't Always A Bad Sign

Chico's FAS Inc (NYSE:CHS) is up over 38% YTD, a good chunk of that coming from a gap higher that occurred on February 22. Since that gap, the stock has been stuck. Like DSW, even while the broader market has pushed higher in March, Chico's has seen little progress and finished down slightly on Monday even as the S&P 500 turned in a 1.39% gain. The range tells the real tale. The stock has been trading between $15.79 and support above $14.14. A drop below $14.14 given the anemic price action recently, would close the gap higher and provide a target of $12.75. $14.90 should also be watched, as a drop below that level means $14.14 is likely to be tested. On-balance volume is holding, signaling there is still buying interest in the stocks. A push above the $15.79 could mean renewed interest and upside target of $16.85 (52-week high is at $16.50).

SEE: 52-Week Highs/Lows

Urban Outfitters (Nasdaq:URBN) has had a choppy year with multiple significant gaps in the price occurring so far in 2012. The stock has repeatedly faltered at the $30 level, a level it once again approached on Monday. Since mid-January the stock has been trending higher, and on-balance volume is confirming the rise. The close above $30 is a pivotal marker for the stock, having penetrated the level on an intra-day basis Urban Outfitters has not closed above $30 since August, 2011. Closing above $30 is not likely to be an easy feat though, but if it does the next target is $33.90. Weakness near this strong resistance levels means $28 is likely to been seen in short order, with a drop below $27.50 signaling a larger potential decline.

Men's Wearhouse (NYSE:MW) had a great January and February with those two months contributing most of the nearly 25% the gain has seen so far this year. Through March that trend has slowed, and the stock has moved sideways as the market continues to move higher. This divergence is a cause for some short-term concern. Support is $37.80 and a drop below that indicates a downside target around $35. The stock still has buying interest though, as it jumped 2.85% on Monday. Whether the stock can move above this range, above $41, will be the test for the bulls. Failure at $41 means $38 is likely to be test quickly. A break above $41 sets a new 52-week high and provides a target of $44.



The Bottom Line
The Apparel Store industry has been doing very well this year, but these four stocks have leveled off over the last month as the major indexes have continued to rally. The major insider sell transaction in DSW Inc. last week is a cautionary signal for the stocks that have failed to move higher over the last month. While all these companies are up for the year, the price action through March is showing that these stocks - at least for right now - are relatively weak compared to the market. Further upside may still be in the cards, but based on current conditions downside is more likely than upside.

SEE: The 4 R's Of Investing In Retail

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Charts provide by stockcharts.com

Related Articles
  1. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  2. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  3. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  4. Chart Advisor

    These 3 ETFs Suggest Commodities Are Headed Lower (COMT,CCX,DBC)

    The charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.
  5. Trading Strategies

    4 ETFs To Trade the Russian Ruble (RSX, ERUS)

    Discover which exchange-traded funds (ETFs) provide investors with the greatest exposure to the Russian ruble and learn about the risks that come with each.
  6. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  7. Chart Advisor

    Stocks With More Upside Due to Bear Traps (TAP, SPY)

    A bear trap is a pattern that typically leads to at least a short-term rise in prices. Here are stocks exhibiting the pattern.
  8. Products and Investments

    Are Dividend Stocks a Good Substitute for Bonds?

    Are dividend paying stocks a good substitute for bonds in a low interest rate environment?
  9. Mutual Funds & ETFs

    When Is the Right Time to Change From Mutual Funds to ETFs

    Find out how to determine when it's the right time for you to switch from mutual funds to ETFs, including the benefits of ETFs and who they are best for.
  10. Investing Basics

    An Introduction To Structured Products

    Structured products take a traditional security and replace its usual payment features with a non-traditional payoff.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center