We are removing American Eagle Outfitters Inc (AEO) from our list of short ideas as it is short-term oversold and near our target price.
Today, we highlight a midcap short idea in the consumer discretionary sector with Skechers USA Inc:
SKX is extending a pullback within its long-term uptrend following an unsuccessful test of long-term resistance from the 2021 high. A breakdown below the 200-day (~40-week) moving average looks set for downside follow-through given there is room to short-term oversold territory.
Strong downside momentum should continue to exert downward pressure on SKX, resulting in a bigger retracement despite the weekly stochastics having become oversold, noting the monthly stochastics are positioned for an overbought downturn in a longer-term setback.
Support in the $40-$41 area frames downside risk for SKX, in our opinion, defined by a Fibonacci retracement level and the lower boundary of the weekly cloud. A stop-loss can be placed just above the 200-day moving average (~$49).
Skechers USA Inc. (SKX, $46.64)
Target: $41
Stop-loss: $49