This column was originally published on RealMoney on Jan. 22 at 11:14 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

I examined rising interest in the retail sector last week and highlighted favorable trades in the group's household names. Let's move to the trendy side of the aisle and check out fashionable stores that focus on a particular demographic or buying trend. This oh-so-hip corner of the shopping mall is attracting tons of fresh capital this January.

These chic operations capture the pocketbooks of upscale teenagers, hip soccer moms and well-groomed executives. Their fully priced sneakers, shirts and legwear often get tossed into fancy bags that cost more than the items themselves. Despite the mark-ups, these shops do a good job drawing in both customers and shareholders ready to bid up prices.

I'm just an average guy with absolutely no fashion sense. I find out everything I need to know about these stores by talking to my teenagers and looking at charts. One thing I've discovered is that trendsetters can go through long periods of feast and famine. So pick your plays wisely and take profit quickly if retailers' fashion ideas or stock prices go cold.

American Eagle Outfitters ( AEOS) has been charging higher in a dramatic uptrend that began in 2002. The juggernaut topped out last November and dropped into a broad rectangle with support at 30 and resistance at 33. The stock pushed back to pattern resistance for the third time earlier this month and broke out on relatively weak volume.


The rally stalled one day after it began, with price dropping into a sideways pattern during last week's options expiration. The weak volume suggests the stock will break the four-week trend line and drop back to test the breakout level near 33. That level could mark a good place to get on board for a quick recovery up and through the recent high.

Zumiez ( ZUMZ) rallied to an all-time high at 38.85 last July, then pulled back in a deep correction. It found support near 20 in September and began a steady recovery on solid accumulation. Price pulled to within three points of the 2006 high last week and started to pull back. Friday's low should offer short-term support.

Respect the old high because it could resist further price gains for the next one to three months. But a well-timed entry on any pullback that reaches support between 31 and 32 shows very favorable risk/reward. Traders can then sell the rally up to resistance or hold on for a possible breakout to new highs later this year.

Guess ( GES) rallied to an all-time high in November and dropped into a sideways pattern that lasted through the holiday season. It finally broke out two weeks ago and charged up to 78.85 before reversing after an analyst downgrade last week. Thursday's big red bar suggests that price will continue to pull back in coming days.

This is a strong stock that's vulnerable to a sharp downdraft, but the downside should be contained and buyable. The best trade entry would come on an intermediate decline that reaches support in the mid 60s. But it makes sense to watch for buyers to step up to the plate above that level, so keep a close watch on price action just below round-number 70.

Aeropostale ( ARO) is a hot retailer that went deadly cold in late 2004 after a strong run. It bottomed out almost a year later in the upper teens and began a choppy recovery. Earlier this month, price finally returned to the high and, last week, pushed above it on solid volume. This bullish move sets the stage for an uptrend that could last for many months.

But I don't recommend buying the stock right here. The recent push to new highs looks too vertical, given the size of the broad consolidation pattern. You'll also notice that price hasn't gone through a substantial pullback in many weeks. My recommendation is to wait for a test of the breakout level and buy support between 31 and 32.

Urban Outfitters ( URBN) pulled back through most of 2006 after a sharp uptrend that topped out above 30. It finally bottomed out in the lower teens last summer and started a respectable recovery. Price has now moved up to key resistance at the broken top. This suggests it will pull back and consolidate its recent gains in coming weeks.

The stock has lifted firmly off the lows but it doesn't make sense to buy it right here. That will change on a rally through the recent high at 26.63 or a pullback that finds support near the 50-day moving average at 23. At a minimum, current shareholders should now tighten up their stops and take profit on any downturn.

At the time of publication, Farley held no positions in any of the stocks mentioned, although holdings can change at any time.

Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback; click here to send him an email. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.

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