While the discussion of an economic recovery is still much debated, the stock market is technically still above its September breakout and the benefit of the doubt must still be given to the bulls. With this in mind, traders that focus on strong stocks in the appropriate sector can greatly improve their chances of success.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

Several apparel stocks remain in a good position despite the recent weakness in the markets. The consumer discretionary stocks should do well as a group early in a bull market as consumers begin to feel more comfortable with the economy. Check out Ross Stores (Nasdaq:ROST): this stock broke out from a consolidation in October, and it refused to give up any ground during the recent market weakness. In fact, ROST is beginning to emerge from a bull flag pattern that could take it to much higher prices.

Source: StockCharts.com



Another apparel stock that recently cleared a consolidation pattern is Urban Outfitters (Nasdaq:URBN). This stock was trading in a channel as it corrected a rally from its bear market lows in 2009. It recently broke out of this channel on strong volume and also cleared its last pivot high from September. This higher high may be a clear signal that a trend change is underway.

Source: StockCharts.com



Lululemon Athletica (Nasdaq:LULU) is another apparel stock that may be clearing its base. This stock has been quite volatile recently, falling under its base in September before violently rebounding back to the top of its prior base. This move trapped a lot of short sellers as they were expecting a breakdown. LULU has begun to break above resistance near $47, but hasn't been able to follow through. Traders should monitor this level to see if LULU can gain some traction.

Source: StockCharts.com



Under Armour (NYSE:UA) on the other hand, had no trouble clearing its recent consolidation. Looking back, UA cleared a larger base back in September before settling into a second consolidation in October. It was able to clear this consolidation in November, even as the markets were pulling back. It held above the breakout level near $47.50 and could be resuming its move higher from here.

Source: StockCharts.com



The Bottom Line
The apparel group will be an interesting sector to follow as we head into the holiday season. This group would be considered an early cycle sector, which would perform well in the early stages of a recovery. If the markets are indeed forming a longer term bottom, then this group should have support from institutions looking for a longer term investment. As with all stocks, traders should monitor recent support levels to look for a change in character, but for now these stocks appear to be showing accumulation.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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

Related Articles
  1. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  2. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  3. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  4. Stock Analysis

    Analyzing Porter's Five Forces on Under Armour (UA)

    Learn about Under Armour and how it differentiates itself in the competitive athletic apparel industry in light of the Porter's Five Forces Model.
  5. Stock Analysis

    The Biggest Risks of Investing in Qualcomm Stock (QCOM, BRCM)

    Understand the long-term fundamental risks related to investing in Qualcomm stock, and how financial ratios also play into the investment consideration.
  6. Stock Analysis

    The Biggest Risks of Investing in Johnson & Johnson Stock (JNJ)

    Learn the largest risks to investing in Johnson & Johnson through fundamental analysis and other potential risks. Also discover how JNJ compares to its peers.
  7. 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.
  8. Investing Basics

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  9. Stock Analysis

    The Biggest Risks of Investing in Celgene Stock (CELG)

    Discover the biggest risks to investing in Celgene Corporation when reviewing fundamental analysis and other external factors that may affect the stock's price.
  10. Stock Analysis

    Understanding Chipotle's Financials (CMG)

    Learn about Chipotle Mexican Grill and its financial statements, including metrics such as comparable sales, operating margin and returns.
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. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  3. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  4. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  5. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  6. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center