The company reported earnings of 38 cents per share, which beat Wall Street estimates of 29 cents per share; revenue came in at $680.40 million, which also topped estimates of $666.07 million. DSW's same-store sales came in at 0.6%, which beat Wall Street consensus for a decline of 2%. The company also raised earnings guidance with a target of $1.45 to $1.55 a share, compared to estimates of $1.44 a share.
CEO Roger Rawlins was upbeat on the conference call, citing a dramatic improvement in the women's category, which turned positive during the quarter, and a successful expansion into kids and the athletic segment, which resulted in market share gains and winning new customers.
Rawlins also mentioned that over the next year, the company will start a number of new initiatives with the goal of inspiring brand loyalty and making an emotional connection with its customers.
At last check, DSW was ripping sharply higher by 19.6% to $18.76 a share on heavy volume. Volume so far in Tuesday's trading session has already surpassed 9.8 million shares, which is dramatically above its three-month average action of 1.72 million shares.
If you take a look at the chart for DSW, you'll notice that this stock is gaping up significantly above both its 50-day moving average of $17.38 a share and its 20-day moving average of $17.57 a share with monster volume. Despite this strong action, shares of DSW are far from out of the bearish trend they have been stuck in for the last three years.
That said, a significant technical development could be under way for DSW if this stock can manage to break out above a key downtrend line that dates back to the start of 2015 with strong volume. A move and especially a close above that massive trendline that is major resistance could set up this stock for much more upside in the coming weeks and months.
Traders should now look for long-biased trades in DSW if this stock can manage to clear and close above some key near-term resistance levels at $19.40 to its 200-day moving average of $19.78 a share, and then above more key resistance levels at $21.47 to $21.80 a share with strong volume.
A high-volume move or close above those levels will then push this stock back above that key downtrend line, and set up shares of DSW for a move toward another key downtrend line that dates back to 2013. Traders should stop out or avoid this idea if DSW moves back below its 50-day moving average of $17.38 with unusual volume.
The bottom line, shares of DSW are on the move with heavy volume after the company reported an upbeat quarter that could be signaling a fundamental turnaround is in play. If this stock can manage to close above a number of near-term resistance levels mentioned above, it will set up to trade toward $25 to $28 a share in the near future. That $28 level sits at another key downtrend line, so the bears could at least see pressure to that area in the near future.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.