Pacific Sunwear of California (PSUN)

Company

"We started as a little surf shop in Newport Beach in 1980, and we're now one of the top names in teen fashion with 900 stored in 50 states. As we've grown, our focus has remained: stay true to our roots in youth culture and offer what's next now. PacSun is headquartered in sunny Anaheim, California, where employees can hit the on-site gym or full-service cafe. Our distribution center is located in Olathe, Kansas. Regional Director, District Manager and store positions are located throughout the United States." (company website)

swir(4-1)
PSUN 4-month chart
psun(4-1)_1yr
PSUN 1-year chart

Buy

Pacific Sun hit bottom in late January, falling to below $1/share. Since then, the price has climbed fairly steadily, with a surge in May. After peaking near $6/share, it came back to $5, closer to the 50-day moving average, and in the last three days the PPO line has begun to converge back toward the signal line. The earnings surprise in August was followed by a big sell-off, but that also marked the turn upward of the 50-day moving average.

  • Percentage price oscillator (PPO) — beginning to converge, although still below the signal line
  • Volume — since mid-August, there has been only one higher-than-normal-volume down-day, right after earnings

Based on technical analysis, MarketEdge calls PSUN a "strong buy" in a "strong upward trend," noting that it is "oversold" and at a "good entry point."

Sell

gain Bottom line
18%

After solid advances last Friday, the Columbus Day market pretty much stalled, so I cashed out. PSUN has already stretched out the Bollinger band since I bought it, and the price moves have not been accompanied by volume. Since the price has doubled in the last two months, it would not be unusual to see a period of consolidation take place. Erring on the side of caution, I banked a very nice profit.