Apparel and accessories retailer Abercrombie & Fitch Co. (ANF) reported better-than expected earnings before the opening bell this morning. The stock gapped higher and reached and exceeded my quarterly risky level, now a pivot at $24.92. If you made an earnings bet, consider reducing holdings now!

Before earnings, Abercrombie shares were already in bull market territory. The stock closed Tuesday, March 5, at $21.35, up 6.5% so far in 2019 and in bull market territory at 39.7% above its Nov. 20 low of $15.28. This solid recovery continues, but beware that current strength is a consolidation of a bear market decline of 48.5% from its 2018 high of $29.69 set on Aug. 14. Back on Aug. 30, the stock gapped lower on a negative reaction to earnings, which leaves a price gap to its Aug. 29 low of $25.99. Technicians say that price gaps are almost always filled.

The specialty retailer offers apparel and accessories for all members of the family. Some brands focus on the younger crowd – those between 21 and 24 years of age. The Hollister brand targets the teen market with endless summer stylings. In addition to having stores around the world, Abercrombie has an active e-commerce strategy.

Analysts expected Abercrombie report earnings per share (EPS) of $1.15 when the retailer released results before the opening bell this morning. The company beat estimates by 20 cents, posting EPS of $1.35. Abercrombie now has a seven-quarter winning streak in terms of beating EPS estimates.

The daily chart for Abercrombie

Daily technical chart showing the performance of Abercrombie & Fitch Co. (ANF)
Refinitiv XENITH

The daily chart for Abercrombie shows how volatile this stock can be in reaction to earnings. Notice the price gap lower following earnings reported on Aug. 30. Then, on Nov. 29, the stock gapped higher in reaction to earnings, which set the stage for the bear market rally for the stock.

Abercrombie shares closed Dec. 31 at $20.05, which was an important input to my proprietary analytics. This resulted in my quarterly risky level, now a pivot at $24.92. The close of $21.95 on Feb. 28 was another input to my proprietary analytics and generated my monthly value level at $18.34.

The weekly chart for Abercrombie

Weekly technical chart showing the performance of Abercrombie & Fitch Co. (ANF)
Refinitiv XENITH

The weekly chart for Abercrombie is positive but overbought, with the stock above its five-week modified moving average of $21.75 and above its 200-week simple moving average, or "reversion to the mean," at $19.51. This average was last tested during the week of Jan. 18. The 12 x 3 x 3 weekly slow stochastic reading is projected to end the week at 80.80, just above the overbought threshold of 80.00.

Trading Strategy: Buy Abercrombie shares on weakness to the 200-week simple moving average at $19.49 and to my monthly value level at $18.34, and reduce holdings on strength to my quarterly risky level at $24.92. The next sell level is the price gap to the Aug. 29 low of $25.99.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.