Abercrombie & Fitch (ANF, $15.99, down $1.80) is trading lower again this morning following Friday’s disappointing earnings report. The company missed Wall Street’s expectations and offered a bleak outlook on holiday sales as it cut its fiscal-year numbers and sees results for the current quarter well below expectations.
I mentioned the stock Friday morning when it was trading at just under $20 and said that it had a good chance of testing $17 and then $10. I’m not interested in riding Abercrombie down to $10 because the first level of support I had mentioned for the stock has been broken.
There is some nervousness that ANF’s CEO might not be brought back to run the company and if he isn’t then there is a good possibility that the stock heads below $15. If you entered any of the trades from Friday’s blog, take advantage of the breakdown and close the November puts today or at least half of them.
The Abercrombie November 22.50 puts (ZWRWX, $6.00, up $1.60) were profiled at $3.30 but I was high on the December 17.50 puts (ZWRXW, $3.00, up $0.80) which were trading for $1.70 at the time. I mentioned if we got the drop to $17 then these calls would double. Well, we are not exactly at a double because the weekend knocked some time premium out of the trade but either way we got some nice gains.
You can set stops on the December puts at $2.50-$2.60 or even sell half of them today at current prices. The selling could increase as the day progresses and if there is a rebound in the stock, the stops will protect your profits.