Trading Guidelines for Abercombie, Costco, 2 Others That Are Reporting

NEW YORK (TheStreet) -- Today we crunch the numbers on four retail companies that will report quarterly earnings before the start of trading on Thursday.

Abercrombie & Fitch  (ANF) and Sanderson Farms (SAFM) have double-digit gains year to date. Costco (COST) and Fred's Inc.  (FRED) are lower, with Fred's down by double digits.

The profiles below provide trading guidelines for the stocks in two "crunching the numbers" tables that follow.

Abercrombie (ANF) ($36.66), up 11% for the year to date. Analysts expect the clothing retailer to report an earnings per share loss of 18 cents. The stock has been trading back and forth around its 200-day simple moving average since Feb. 26 with this moving average now at $36.64. The 2014 intraday high is $42.49 on March 5 with a subsequent low at $34.55 set on April 17.

The weekly chart is negative with its five-week modified moving average at $37.24 and its 200-week SMA at $47.07. Weekly and annual value levels are $35.56 and $29.88, respectively, with monthly and semiannual risky levels at $37.37 and $53.43, respectively.

Costco (COST) ($113.87), down 4.3% year to date. Analysts expect the operator of membership retail-oriented warehouses to report EPS of $1.09. The stock set an all-time intraday high at $126.12 on Nov. 25, and has been trading back and forth around is 200-day SMA now at $116.03 since Jan. 8. The stock traded as low as $109.50 on Feb 4 and as high as 117.47 on Feb. 28, and it's below its 200-day SMA.

The weekly chart is positive with its five-week MMA at $114.42 as the stock's 12x3x3 weekly slow stochastic is on the rise. Annual value levels are $112 and $97.60 with weekly and monthly risky levels at $116.62 and $121.42, respectively.

Fred's  (FRED) ($16.49), down 11% year to date. Analysts expect the retailer discount general merchandise chain to report EPS of 20 cents. The stock traded to a multiyear intraday high at $21.05 on March 3, and slumped to as low as $16.16 on May 21, below its 200-day SMA at $17.33.

The weekly chart is negative with its five-week MMA at $17.41 and its 200-week SMA at $14.40. Semiannual and annual value levels are $15.49 and $10.67, respectively, with a quarterly pivot at $16.98, and semiannual and monthly risky levels at $19.77 and $19.83, respectively.

Sanderson Farms (SAFM) ($87.01), up 20% year to date. Analysts expect the poultry processing company to report EPS of $1.64 which is up 10 cents from last Friday's estimate. The stock set an all-time intraday high at $88.78 on Tuesday and the stock above all five key moving averages in the first table.

The weekly chart is positive but overbought with its five-week MMA at $82.72 in a chart pattern that has the formation of a parabolic bubble. Monthly and quarterly value levels are $81.93 and $69.93, respectively, with a weekly pivot at $87.45 which was a magnet on Tuesday.

Your investment policy among these stocks depends on whether or not you are a buyer on weakness or a seller of strength. We advocate using a good-'til-cancelled limit order to buy weakness to a value level or to sell strength to a risky level.

Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics

(table here)

This table provides the technical status for the stocks profiled in today's report.

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.

Interpretations: Stocks below a moving average are listed in red.

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon.

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon.

Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell

(insert 2nd chart here)

This table presents the EPS estimates including date and before or after the close, and where to buy on weakness and where to sell on strength.

EPS Date is the day the company reports their quarterly results.

EPS Estimate is the earnings per share estimate from Wall Street analysts.

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

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At the time of publication, the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com.

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