COH - 6 month

"Gap Down" charts are one of my favorite patterns to take advantage for a cash flow trade.  It's even better when another formation "Gap and Go" pattern inserts itself in the pattern to confirm a double bullish trend.  Recently, I had one of my students question Coach, Inc. COH and he thought it was a short.  I strongly disagreed and given it's recent strength, I believe it still has room to run to complete the pattern formation.  Here is a step-by-step on COH.  

'A' = 22-Jan-2012 COH had a gap down from a previous close of $60.68 to 50.75 (- 16.3%).  When a stock has this kind of damage, for many that owned the stock at higher levels there was all by no chance to exit the stock.  The stock "Gap Down" that nothing could have protected you other than if you were wise enough to protect your Long position with some Put options.  The stock is in damage control mode at this point,  The prudent thing if you're long is to sell it immediately, then take a wait and see approach.  Yes, had you sold the stock on the first day it gapped down, you would have missed out on some gains; however, COH ultimately extended its weakness and made another lower.

Remember this term, "Red Dog Reversal".  It is a term Scott Redler, Chief Strategist for T3Live.com, made famous.  The layman's term of the definition is that a stock has 5 bars, with the 5th bar closing off the lows hinting that the 6th trading day would get a bounce.  Not only did the stock experience a "Gap Down", it was followed by a "Red Dog Reversal" which eventually led to a "Gap and Go".

'B'= 27-Feb-2013 is a beginning patter of a "Gap and Go".  A "Gap and Go" is when a stock trades in momentum where the price action initiates a gap and takes off; hence the word 'Go'.  The trade is considered bullish when the stock creates a patter of higher lows.  Here is the price action on the "Gap and Go" that started on 27-Feb-2013:

27-Feb-2013  $47.82

28-Feb-2013    48.33

1-March-2013  48.22

4-March-2013  49.28

5-March-2013  50.10

The fact that the stock experienced a "Gap and Go" especially off of a "Red Dog Reversal" is double bullish.  The stock still needs to complete full circle by getting back to it's 22-Jan-2012 price of $60.68 to fill the gap.  Since the stock broke resistance at $52.41, the pattern is still live to get back to $60.68.  There was a lot of technical damage, but this premier blue chip textile consumer good gets the benefit of the doubt.