Naked Brand Group Limited (NASDAQ:NAKD) gapped up over 6% higher on Wednesday. The digital intimate apparel and swimwear-focused company was trending on r/WallStreetBets along with AMC Entertainment Holdings Inc (NYSE:AMC) and GameStop Corporation (NYSE:GME).
All three stocks were the target of an epic short squeeze earlier this year but unlike AMC and GameStop, Naked Brands hasn't had a subsequent massive rally. Since skyrocketing about 885% between Jan. 27 and Jan. 28 to reach a high of $3.40, the stock declined about 85% and put in a bottom on April 16 near the 50-cent mark.
See Also: How to Buy Naked Brand Group Stock Right Now
The Naked Brands Chart: After putting in a bottom at $0.50, Naked Brands has traded in a sideways pattern between the level and $1. The stock has tested support at 50 cents on numerous occasions and held above it which indicates it's a key support area.
After retesting the level four times between Aug. 16 and Aug. 19, bulls came in and gapped Naked Brands up over 13% higher on Aug. 20. The stock then consolidated lower for two trading days before breaking up and running another 13% higher on Tuesday. The big bullish move allowed Naked Brands to close over a resistance level at 62 cents.
On Wednesday there was sustained bullish volume in the stock. By about noon about 52.41 million shares of Naked Brands had changed hands compared to its average 10-day volume of 43.18. Volume is an excellent indicator for technical traders because it indicates the amount of interest in any particular security. High volume means there is heavy interest in the stock which is a good sign for the bulls.
Naked Brands relative strength index (RSI) was registering at about 71%, which indicates the stock is in overbought territory. Bulls will want to see eventual consolidation on Naked Brand’s stock to drop the RSI back down below 70%.
The stock is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. On Tuesday Naked Brands was also able to close above the 200-day simple moving average (SMA), which indicates overall sentiment in the stock has turned bullish.
- Bulls want to see consolidation, at least on lower timeframes, to cool down Naked Brand’s RSI and then for big bullish volume to come in and push the stock up over a higher resistance level at 72 cents. If Naked Brands can clear the level, it has room to move up to the 85- cent mark.
- Bears want to see big bearish volume come in and drop Naked Brands down below support at the 200-day SMA which aligns with price history support at 62 cents. If the stock loses the areas as support it could fall back down to the 50-cent level.
