On July 5, 2017, Limited Brands (LB) reported less than stellar monthly comps for June 2017. Call it a “skimpy” sales report. This was the 7th straight month of dismal monthly sales according to a Zacks Investment Research article I read.

In my previous Trendy Stock Charts article for Limited Brands (LB), I warned of one more probable pullback. That pullback should find support as mentioned

……., wave 5 of the Bearish Impulse wave pattern should find ample support around the $40 – $43 price level. Let’s review some shorter-term charts and look at the $40-$43 support area in more detail.

That article can be quickly accessed here “6/8/2017 – Limited Brands (LB) Stock Chart Analysis“.

Limited Brands (LB)

Let’s look at one more comment from the previous article and then look at some current charts.

Since the MACD Histogram reflects buying momentum that is still increasing, LB’s share price has the potential to reach for the $57 price area during the current uptrend. However, any resistance at that level should be considered a selling opportunity as the final leg down could then be starting. At a very minimum, wait until a re-test of the support area from the Long-Legged Doji candlestick pattern is complete before making a second scale-in purchase of the stock.

This first chart is an updated 2 year weekly chart from the June 8, 2017 article. It shows that LB’s share price reached $55.98, slightly less than the $57 price target I mentioned above.

LB’s share price did not break below the bottom of the Long-Legged Doji candlestick pattern, a successful re-test so far. A Long-Legged Doji candlestick pattern at the bottom of a long downtrend is a potential reversal signal.

But is the re-test of the bottom over yet? Is it warranted to make a scale-in purchase at this point?[s2If !current_user_can(access_s2member_level1)]……

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I look at the $43 support area in more detail as well as provide the next support level below in case the $43 support level fails. It is important to know where your downside risk is as well as the next area to make a scale-in purchase.

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)] The answers to those questions are “I’m not sure” and “maybe”. Understand that making a scale-in purchase at this level is only for the long-term investor.

Anyone looking for a stock to trade should look elsewhere. LB’s share price is still in a downtrend. It is better to trade shares that are trending upwards, not down.

LB – Falling Window Candlestick Pattern

The monthly sales report caused LB’s share price to gap-down and develop a Falling Window candlestick pattern on its daily chart. This is a 3 month daily chart where I’ve identified the Falling Window.

Any initial push upwards by LB will be limited by the resistance from the Falling Window candlestick pattern. LB’s push will most likely stall in the $46.74 – $48.56 range, not really a great return from current prices.

There will be another pullback after LB’s share price reaches the $46.74 – $48.56 price range. There is a chance the pullback could push below the $43 support level. Monitor that pullback. If the $43 support level holds again, use it to make a scale-in entry. And only make the scale-in entry if LB’s share price is rebounding on heavier than normal buying volume. If the $43 price level does not hold, let’s review where the next support level is below $43 in case of a breach.

The chances increase for the $43 area to hold on another re-test of the support if LB’s share price reaches the 161.8% Target Line, or the $48.56 price level, before pulling back for the re-test. If LB’s share price only reaches the 100% Target Line (the $46.74 price level) before starting to pull back, the chances increase that the $43 support level will be breached In essence, the higher the rebound before the pullback, the greater the chance that the previous bottom holds.

LB – $38.56 Support Area

This is a 2 year weekly chart again for Limited Brands (LB). The 100% Target Line from the Fibonacci Extension Tool is the next support area below the $43 price level. The 100% Target Line reflects a $38.56 price target.

The 3 most common price targets when using the Fibonacci Extension Tool are the 61.8%, 100% and the 161.8% Target Lines. The 2 Target Lines remaining are the 100% and the 161.8% Target Lines. The 161.8% Target Line is not pictured – it has a $13.16 price target.

Based on the strong buying volume from the Long-Legged Doji candlestick pattern, any break below the $43 and towards the $38 price level should be “relatively” quick. Waiting until after LB’s next earnings report seems to be the best approach at the current time to see if the $43 support is going to hold or give way to $38.

Limited Brands (LB) – Summary

Are you a long-term investor that cares for the Limited Brands (LB)? If so, consider starting to build a position with a small scale-in entry around the $43 – $45 price range. I would purchase no more than 20% of your total position at this point though. The remaining 80% should be held until LB’s share price flashes more potential reversal signals. After all, Limited Brands (LB) share price still is in a downtrend.

The summary from my previous update fits very well still…

Any re-test of the Long-Legged Doji candlestick pattern support area is an excellent opportunity to initiate a long-term position for your portfolio. A second scale-in-in purchase would be made either on a break below the support area near the $40 level or when LB’s share price breaks above the 200 Day moving average on buying volume that is greater than normal trading volume.

The $38 – $40 price level would be the 2nd scale-in purchase area. A second scale-in purchase should be another 20-20% of your total shares. You should then be about 50% invested in LB. The remaining 50% will not get purchased until LB confirms an uptrend.

If you have any questions with the trading strategy, stop by the Idea Chamber or shoot me an email!

Good luck trading!

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