Wilsons Leather (WLSN)

Company

"Wilsons Leather is the leading specialty retailer of leather outerwear, accessories and apparel in the United States. As of February 26, 2005, Wilsons Leather operated 435 stores located in 45 states, including 311 mall stores, 108 outlet stores and 16 airport stores." (company website)

Buy

7-Apr-05. Wilsons Leather has been recovering from a steep decline that ended in February. After trading several weeks around $4.50, WLSN broke above $5 yesterday on more than three times normal volume, following news of increased same-store sales. Cash flow (CMF) is strong, and the trend is strengthening (ADX). The cautionary notes are sounded by stochastic relative strength (StochRSI) which indicates WLSN was overbought. Typically this signals a price drop, but I believe that will be mitigated by the strong sales news. Also, the 50-day moving average is on track to cross soon back above the 200-day moving average, a technical event that also typically gives a stock a boost.

Sell

18-May-2005. Whew! I have been nursing WLSN along for over a month, watching it tread water, if barely that. Yesterday, Wilson Leather released earnings and reported a narrower loss than expected, as well as robust same-store sales growth.

Some time ago I placed an order to sell at $5.40, on the chance that WLSN might move that high again one day. In anticipation of earnings, I also prepared an order to sell with a trailing stop if WLSN fell 2%. That was I felt I was covered whichever way earnings went.

As it happened, it was the sell order that executed first. And a good thing, too, for since the first rush of enthusiasm this morning, WLSN has sat right around $5.40. I'm happy to have gotten out with even a small profit. After all, the signs aren't all that good: price momentum (PPO) has been falling; there's no discernible trend (ADX); money flow (CMF) is negative; and relative strength has ticked up but the trend is still downward.

It's possible that with earnings out, WLSN will start to go up, but it could as well trade sidewise for weeks, or fall. Good to be out.