For over a quarter of a century after its 1996 IPO, fashion retailer Abercrombie & Fitch had been unable to produce reliable shareholder returns. Even the stock’s noteworthy rallies to over $80 and $70 a share in 2007 and 2011, respectively, were soon followed by declines back below the $20 mark. The last such drop in 2022, however, gave way to a much bigger surge to nearly $200 by mid-2024.
Alas, the bulls couldn’t maintain momentum and the share price has been cut almost in half to $106 over the last eight months. Is this time different, or should we expect another selloff to the mid-teens like in the past? The Elliott Wave chart below gives us a hint.
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The weekly chart of Abercrombie & Fitch stock shows that the post-2022 surge has an impulsive structure. It can be marked 1-2-3-4-5 in wave (3) following another impulse pattern in wave (1) and a simple a-b-c zigzag in wave (2). The current near-50% slump should then be wave (4) with wave (5) yet to lift ANF to a new record.
Fifth waves are never guaranteed, but the structure of wave (4) looks promising for the bulls. It can be seen as a simple a-b-c zigzag with a triangle in wave ‘b’. Triangles precede the final wave of the larger sequence, in this case wave ‘c’. So if this count is correct, we can expect the uptrend to resume in wave (5) as soon as wave ‘c’ of (4) is over.
Upside targets near $220 make sense, which means that Abercrombie & Fitch stock can roughly double from its current level. Once the bulls reach the new high, however, the impulse pattern, which began in 2020, would be complete. According to the theory, a three-wave correction should then take place. Instead of a fresh ‘buy’ signal, we think that the anticipated rally above $200 would be a good profit-taking opportunity.
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