How to Trade Ralph Lauren Shares After the Stock Lost Its Shirt

NEW YORK (TheStreet) -- Ralph Lauren (RL) shares haven't had a good year so far, but the company's earnings report Wednesday could change that.

The stock traded as high as $187.49 on the last day of 2014 as investors were counting on strong holiday sales for the clothing, furnishings and fragrance designer and retailer.

But a downward slide began on Jan. 9 when Janney Capital Markets downgraded the stock to neutral from buy.

Ralph Lauren plans to report earnings before the market opens Wednesday, and analysts on average expect the company to earn $1.32 a share. Whether the company can beat this consensus estimate is a coin toss. If the company misses estimates, any additional decline in the stock may be factored into the stock's technical charts and key technical levels.

Between Jan. 27 and Feb. 2 shares of Ralph Lauren stabilized around its 200-day simple moving average, which was then $165.13. An earnings miss reported before the opening bell on Feb. 4 resulted in a price gap below the 200-day simple moving average, and the stock's slide did not subside until March 11. Since then the stock has been trying to stabilize.

Let's look at the daily and weekly charts for Ralph Lauren and provide the key technical levels at which to buy on weakness and the key technical levels at which to sell on strength.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

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