Abercrombie & Fitch (NYSE: ANF) is in a strong bearish trend that started in November. Since topping around $78, the shares fell about 50% to $40 in February.
But the stock has recovered since that low and now trades up near $53. More importantly, the shares could be carving out a cup-and-handle formation.
The shares also managed to rise back above the 50 day moving average. Such a move indicates the beginning of a new bull phase.
In a cup and handle, it’s important to wait for a breakout past the neckline. For ANF, the neckline is just above $53 (blue line in chart), so we want to see a move past $54 before taking a long position.
Once you see that breakout, you can hop on board with a stop around $47.50, or the low of the handle. The target of this pattern is $66, or 23% above the neckline. More aggressive swing traders of ANF may place a stop at $51.