Abercrombie and Fitch Co. (ANF) is a major clothing designer and retailer catering mostly to teens. ANF is trading at $19.99 around the lower end of its 52 week range of $19.34-$45.50. Year to date the stock has underperformed the market by quite a bit, at 30.24%. The stock dropped today by about 0.55% or $0.11. This move happened after an unusually large number of bearish options hit the tape yesterday and this morning.

Early on yesterday a trader bought 3,500 of the ANF May 29th Weekly 18.5 Puts for $0.32 when the stock was trading at $20.73. Over 3,600 contracts of the May 29th Weekly 18.5 Puts were traded yesterday hinting at bearish sentiment. The May 29th Weekly 18.5 Puts have since traded as high as $0.56 today making this a highly profitable trade. Today a trader bought 1,027 of the ANF May 29th Weekly 17.0 Puts for $0.13. This order was recorded about an hour after the open on OptionHacker. Over 5,500 contracts of the May 29th Weekly 17.0 Puts have been traded today hinting at further bearish sentiment into earnings.

Over the past 8 quarters ANF has rallied on earnings day only 3 times with an average move of 8.30%. ANF also appears bearish on a chart going into the release. The stock has been trading below the Ichimoku Cloud for around 4 weeks now, and appears to be continuing the downward trend in today’s session. The area between the Senkou Span A line and the Senkou Span B line appears to be increasing its size indicating a trend that is harder to reverse. Due to the stock’s historical performance on earnings day and weak technical data, it is hard to justify anything but a bearish trade in ANF.

The options market is currently implying a move of around $2.10 or 10.5% in ANF by this Friday’s close giving us a downside target around $17.82.

Andrew Keene


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