The stock actually posted a pretty impressive bounce on the day, given that it opened all the way down at $17. Fueling the plunge is the company's disappointing fiscal fourth-quarter earnings results.
After back-to-back sessions where Stitch Fix stock posted solid gains, Wednesday's decline leaves the stock at a very critical support level. If it gives way, there's no reason why investors can't see new 52-week lows in the stock.
Earnings of 7 cents per share beat estimates by 3 cents, while revenue of $432.15 million was in-line with expectations and grew 35.8% year-over-year. However, first-quarter revenue guidance has spooked investors, although its full-year sales outlook was about in-line with expectations.
While the stock is posting an impressive bounce from the lows, investors have to be concerned with the selloff -- particularly with the overall market under pressure as well.
Despite Wednesday's strong bounce, I am not yet inclined to buy Stitch Fix stock. Let's see if it can close above $18 in the session and build on that momentum the rest of the week.
Stitch Fix is also being watched by Real Money as its Stock of the Day. Let's take a closer look at the charts.
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Trading Stitch Fix Stock
As you can see on the daily chart above, Stitch Fix stock broke below previous double-bottom support at $18. Twice this level bounced SFIX stock last month, each time pushing it above $20.
While it's discouraging that Stitch Fix stock broke below this mark on Wednesday, it's encouraging that it was able to reclaim $18 so quickly. The task now becomes staying above this support level. Traders will also notice that the bounce came right on the backside of prior downtrend resistance (blue line).
So what's the setup from here?
If SFIX stock can maintain above the $18 level, investors can look for further upside. First see if the stock can reclaim its 20-day moving average. If it can, the October highs at $20.69 are on the table and/or the 50-day moving average, depending on which comes first.
However, should support fail, more selling pressure could ensue. The first downside target is the Wednesday low, technically at $16.99. Below that mark and the 2019 low at $16.55 is the next target, followed by the 52-week low at $16.05.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.