Retail stocks rallied on Tuesday, on news of delayed tariffs on some Chinese goods. As such, the shares of Urban Outfitters (URBN) ran right into a pair of familiar trendlines, setting off a historically bearish signal for the stock ahead of earnings next week.
Specifically, URBN shares came within one standard deviation of their 40-day moving average, after a lengthy stretch beneath the trendline. Over the past three years, the stock has endured 12 similar encounters, after which URBN was lower one month later 83% of the time, averaging a loss of 8.2%, per data from Schaeffer’s Senior Quantitative Analyst Rocky White.
Likewise, URBN is also ran into a familiar wall in its 50-day moving average. After four similar run-ins with this trendline, the security was lower 100% of the time a month later, down an average of 9.1%.
Today, the shares of Urban Outfitters have resumed their long-term downtrend, last seen 6.3% lower at $20.50. The equity earlier touched a nearly two-year low of $20.17. What’s more, URBN has given up more than half its value since peaking at $52.50 on Aug. 22, 2018.
Urban Outfitters will report earnings after the close next Tuesday, Aug. 20. The stock has moved lower after four of the last five earnings releases, with URBN dropping 9.9% the day after the company’s May earnings release. Should the company’s next quarterly report disappoint like sector peer Macy’s (M) today, it could exacerbate selling pressure on the shares.
A disappointing earnings showing could also spook some of the analysts still lingering in the bullish camp. Despite URBN’s dismal performance over the past year, the stock still sports five “buy” or better endorsements, leaving the door open for potential downgrades. In the same vein, the consensus 12-month price target of $31.44 represents a steep 53% premium to current levels, leaving URBN vulnerable to price-target cuts, too.