The recent bull run in the U.S. clothing and accessories sector is not likely to last much longer. The Dow Jones U.S. Clothing and Accessories Index has enjoyed an excellent run since May 22, climbing nearly 9 percent over the past six weeks. But that is likely to stall after hitting some overbought indicators. During the recent run, handbag maker Coach (COH) failed to participate, rising only 3 percent despite Athletic Apparel makers Lululemon (LULU) and Under Armour (UAA) increasing by nearly 21 percent and 15 percent, respectively. 


^DJUSCF data by YCharts

When we look at the performance of the Dow Jones U.S. Clothing and Accessories Index, we find that the recent upsurge is likely to peter out soon.

We can see in the chart above that the index appears to have broken out, recently breaking above the $258 region. However, we can also see that the relative strength index (RSI) has reached overbought levels at nearly 72; a reading above 70 is typically defined as overbought.

Moreover, the index also hit the upper Bollinger Band, another overbought indicator. Finally, the index also hit another area of resistance right around the $266 level. 

Coach shares have risen nearly 16 percent, and shares of PVH Corp. (PVH), the maker of Tommy Hilfiger and Calvin Klein apparel, have increased 20 percent over the past year. Shares of Coach and PVH have performed well after having a solid 2016 that came in ahead of analyst expectations. In contrast, Lululemon and Under Armour have fallen 45 percent and 19 percent, respectively, after having a terrible 2016 that saw revenue and EPS miss expectations. 

Shares of Coach, PVH, and Lululemon could be getting ready for a pull-back, with Under Armour setting up for a surge. 

We can see in the following chart that Coach shares are trading at a 52-week high. The stock is likely to fill the gaps created by the $43.75 level, about 10 percent lower from current levels, with risk down to around $41.25. 

COH Chart

COH data by YCharts

Shares of PVH are trading at a 52-week high as well after a big run-up from around $108. The stock's RSI is also trading at over 77, which puts it well above 70, and indicates that it's overbought. 

PVH Chart

PVH data by YCharts

Lululemon has a stretched RSI, trading over 76, and appears to have almost entirely filled the gap at around the $60 level. 

LULU Chart

LULU data by YCharts

Under Armour could have room to run to nearly $28, filling the gap created at the beginning of February, when the company reported weak fourth-quarter and full-year results. 

UAA Chart

UAA data by YCharts

Perhaps one final reason for the group's recent run-up has to do with improved sales among U.S. clothing and accessories stores. 

US Clothing and Accessories Store Sales Chart

US Clothing and Accessories Store Sales data by YCharts

But even that surge may be starting to fade, as the rate of growth appears to be slowing. 

US Clothing and Accessories Store Sales Chart

US Clothing and Accessories Store Sales data by YCharts

All of this seems to point to a U.S. Clothing and Accessory sector that may be in store for a bumpy ride over the next few months. We'll have to keep an eye on any new developments, but the updraft the group has seen is not likely to last. 

Michael Kramer is the Founder and Portfolio Manager of Mott Capital Management LLC, a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.

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