PreMarket Prep Stock Of The Day: Abercrombie & Fitch

Technical analysis can help identify potential entry and exit points for a company. Yet it is the fundamentals behind the company that will dominate the price action in the long run. Therefore, when a company such as Abercrombie & Fitch ANF provides forward guidance, it should be noted and followed.

The price action of the issue after it announced guidance after the close Monday makes it the PreMarket Prep Stock of the Day.

Trying To Find A Bottom: The issue peaked in November at $48.97 and had a steep decline to end the year at $34.83. In Monday’s session, it made a new low for the move when it bottomed at $30.86 and rebounded to close at $32.35. That was its lowest daily closing price since March 2021.

Algos Gone Wild In The After Hours: After the close on Monday, the company issued an update on its forecast for the 2021 fiscal year. The company said it sees preliminary FY21 net sales rising 19% to 20% from 2020. The company also projects a fourth-quarter net sales increase in the range of 4% to 6% year-over-year. 

The company was able to reduce capital expenditures in FY 2021. CEO, “We believe that, if we had the inventory on-hand, we would have delivered sales within our previous outlook range. Post-holiday, as inventory has landed, we have experienced an acceleration in sales trend,” said CEO Fran Horowitz. 

It's not the greatest guidance, but certainly not a reason to slam the issue by $4.76 or 14.6% down to $27.59 in thinner after-hours trading. Calmer heads prevailed and the issue ripped to $35.91 in a matter of minutes. That price action accounted for a 25% swing in the stock off Monday’s closing price — certainly an overshoot on both ends.

PreMarket Prep's Take: When the issue was being covered on the show Tuesday it was trading at the $33 area. Co-host Dennis Dick questioned what the algos were reading from the release.

“They absolutely hammered this thing off the hop,” he said. “Some algo read that dead wrong and lost some money on it.” 

The author of this article discounted the after-hours price action and stated the price action off the open will be important for the issue. If the Street liked the guidance, it would hold Monday’s close and move higher. If the Street was disappointed in the guidance, it would go red on the session but would find buyers ahead of Monday’s low.

ANF Price Action Off The Open Tuesday: The slightly higher open ($32.53 vs. $32.35) has turned out to be the exact low for the session.

Abercrombie & Fitch shares continue to move higher and were up 7.82% at $34.88 Tuesday afternoon.

Photo by Henning Schlottmann via Wikimedia.