I love Ralph Lauren but not the stock at the moment!

Much as I love everything about Ralph Lauren one item I would not be buying right now is the stock which has seen a bright start to the year brought to a shuddering halt in the last few weeks with the price falling from a high of $133.63, to currently trade at $109.34 at the time of writing.

From a technical perspective the volume point of control as denoted by the yellow dashed line was a key contributor to the congestion which followed the rally off the lows of last year, with the heavy concentration of volume around this fuclrum of price revealing its own story, with dense volume continuing higher up towards the $140 per share price point. In addition, the price resistance detailed at $132 per share and denoted with the red dashed line on the accumulation and distribution indicator, also came into play, and the combination of volume and price based resistance was sufficient to cap further advances. The initial move lower started in early May, and an injection of volume two weeks ago on the wide spread down candle confirming the heavy selling pressure now in place.

Last week’s candle also signalled further bearish price action to follow with the weak effort to rise on high volume denoted by the deep wick to the upper body. These candles are typical in price waterfalls as the market makers sell into a weak market stock they have been forced to absorb in the move lower, which results in a temporary pause as new buyers rush in hunting for bargains believing the market is about to reverse, only to be trapped in weak positions as the market makers then sell out, and the stock moves lower once more.

So where next for one of my favourite retailers? The good news is a potential platform of support awaits just below $105 per share, but should this be breached, then expect to see a return to double figures in the longer term, and possibly a move towards $95 per share where further potential support awaits. This was the level that provided a platform for the rally early in the year, so perhaps a repeat is on the cards? Note also the Quantum Trend Monitor is also in transition and moving from bullish into bearish and confirming the current negative picture.

And failing that, I can always come to its aid with some serious retail therapy!

By Anna Coulling

Charts from NinjaTrader and indicators from Quantum Trading