Let's kick off with mid-cap apparel retailer
(GES - Get Report), one of the
highest-yielding retail stocks. Guess designs and sells its clothing label through department stores and company-owned locations, giving the firm considerable retail exposure.
While 2011 has been a difficult year for Guess shareholders (shares are down 34% this year), a potential reversal is pointing toward an upside opportunity right now.
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That's because Guess is currently forming an inverse head-and-shoulders setup right now, a formation that indicates exhaustion among sellers. The inverse head and shoulders is one of the most well-known patterns among would-be traders -- but don't let that stop you from paying attention to it. A recent academic study found that the head and shoulders setup (and its inverse variation) could be both statistically and economically significant. The key to this trade is waiting for it to become a high probability setup.
That happens when shares of Guess break out above their neckline, the price level that's acted as a resistance level as this pattern progressed. For Guess, the neckline is at $35. A sustained push above that price level means that buyers have gained control of this stock.