Profiting On Charming Shoppes

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 |  About: Ascena Retail Group Inc (ASNA), Includes: ANN, CHS, NWY, TLB, WTSL
by: Shmulik Karpf

On January 2nd, I recommended to take profits on our position in Charming Shoppes, Inc. (NASDAQ:CHRS). Subsequently, we sold our position at around $5 after entering at $3.6, banking on a 36% increase in just under a few weeks.

The explanation I provided for the sell was that although I initially recommended CHRS as a potential turnaround play, the stock has raced since our initial buy recommendation in a very short time period. It is often prudent to cash on quick gains rather than wait for the long turnaround move. CHRS, being a highly volatile stock, could provide us with further entry point on potential price dips.

In the past 2 weeks, CHRS has retreated by approximately 8%, bringing up the question whether this retreat should serve as a successful re-entry point.

My answer to that question is- not just yet. An 8% retreat after a quick run of about 40% is not indicative of anything, let alone a strong run.

Let's see how the shares of its competitors have been doing during the same time period.

Company

P/E

Average Daily Volume

Stock Performance

The Talbots, Inc. (NYSE:TLB)

N/A

0.5ML

(4.6%)

New York & Company (NYSE:NWY)

N/A

0.15ML

(4.6%)

Chico's Inc. (NYSE:CHS)

14.45

1.5ML

(0.8%)

Ann, Inc. (NYSE:ANN)

13.5

1.2ML

(5.4%)

Ascena Retail Group (NASDAQ:ASNA)

16.2

0.7ML

14.8%

The Wet Seal, Inc. (WTSLA)

18

1.6ML

5.8%
Click to enlarge
All Data taken from Yahoo finance.

It seems like January is the "return to reality" for a few traditional consumer retail stocks after the usual December boost.

My recommendation is to pursue one of the following two courses of action: either wait on the sidelines for a possible further dip in price or short the stock once it violates the $4.5 price level downwards. You can read more about the shorting option here.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in (CHRS) over the next 72 hours.