Trendy lifestyle retailer Urban Outfitters, Inc. (URBN) is a retail laggard so far in 2019. The stock traded as low as $29.84 on Feb. 22 and is down 9% so far in 2019. The stock is also deep into bear market territory at 42.5% below its 2018 high of $52.50 set on Aug. 22. Even so, the stock is "too cheap to ignore" because its weekly slow stochastic reading is below 10.00 on a scale of 00.00 to 100.00. In addition, the stock is above my monthly and annual value levels at $30.23 and $29.04, respectively.
Analysts expect Urban Outfitters to post earnings per share (EPS) of 79 cents when the retailer reports earnings after the closing bell today, March 5. The stock has a reasonable P/E ratio of 11.61, according to Macrotrends. The retailer has bettered analysts' EPS estimates in six consecutive quarters, but this is not reflected in the daily and weekly charts. Wall Street is projecting year-over-year gains in both earnings and revenue, and some analysts say that the retailer should benefit from refurbished stores and offering more assortments of lifestyle products. Urban Outfitters has also expanded its e-commerce activities.
The daily chart for Urban Outfitters
The daily chart for Urban Outfitters shows that the stock had a strong reaction to earnings released on Aug. 21, which resulted in the Aug. 22 high at $52.50. Investors used this strength to book profits. On Nov. 8, a "death cross" formed when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices would follow. Investors had the opportunity to sell at the 200-day moving average at $41.00 on Nov. 9.
The stock closed at $33.20 on Dec. 31, which was an important input into my proprietary analytics. This resulted in my annual and semiannual value levels at $29.04 and $26.71, respectively, and my quarterly risky level at $35.98. The stock closed at $30.85 on Feb. 28, which resulted in my monthly value level for March at $30.23.
The weekly chart for Urban Outfitters
The weekly chart for Urban Outfitters is negative but oversold, with the stock below its five-week modified moving average of $31.43 and below its 200-week simple moving average, or "reversion to the mean," at $31.17. The 12 x 3 x 3 weekly slow stochastic reading is expected to end this week at 6.87, well below the oversold threshold of 20.00 and below 10.00 as a stock that is "too cheap to ignore." A positive reaction to earnings should have the stock above the five-week modified moving average and the 200-week simple moving average.
Trading Strategy: Buy Urban Outfitters shares on weakness to my annual and semiannual value levels at $29.04 and $26.71, respectively, and reduce holdings on strength to my quarterly risky level at $35.98. My monthly pivot at $30.23 is a key level at today's close – above it is positive, and below it is a warning.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.