Dillard's (DDS - commentary - Trade Now) is pushing further into new 52-week high territory today. The department store operator is up more than 5% following a powerful 10% breakout on Friday. Investors began aggressively bidding up the stock prior to Friday's open after a Deutsche Bank analyst upgraded DDS to buy from hold. By the close, DDS had traded 4 times its daily average, continuing a healthy wave of pre-earnings buying seen earlier in the week.
Friday's big breakout lifted DDS above a short-term trend line, setting the stock up for a powerful run. Today's surge has pushed the stock well above a 10-week consolidation that has been in place since the September highs. Strong support is now in place in the $15.75-to-$15.00 area. A retest of this area would be a low-risk buying opportunity.
Deutsche Bank also raised its price target for DDS to $28 from $13.50. I doubt the current breakout will carry the stock to that level, but there is certainly much more in the way of upside in the near term. A logical initial upside target is the $20 area. Back in the second quarter of last year the stock began a vicious 60% slide after dropping below multi-week support just below $20. I expect a move up to this area to attract quite a bit of selling.
DDS Daily (NYSE) -- Dillard's
Source: TradeStation
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At the time of publication, Morrow had no positions in the stocks mentioned.
Gary Morrow is president of Yosemite Asset Management, LLC, a registered investment advisory firm in San Luis Obispo, Calif. He manages individual accounts through Charles Schwab and runs a long/short hedge fund. Prior to forming Yosemite, Morrow spent 12 years on the floor of the Chicago Mercantile Exchange trading foreign currency and interest rate futures. He holds a bachelor's degree in economics from Ripon College.
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