Why Am I Playing Lousy Retailer

Pacific Sunwear of California, Inc. (PSUN) is a specialty retailer focused on action-sport inspired casual apparel, accessories and footwear designed to meet the needs of active teens and young adults.

I am playing PSUN, purely on technicals. PSUN formed a bottom during the month of Jan 08 at $8.87. After a lousy earnings PSUN hit $8.82 again on 23rd May 08. This could be a pivot support point and possibility of a double bottom. I might be completely wrong and the trade might turn out a horrible one. But in terms of risk/reward it looks lucrative even though the fundamentals are against it. Fundamentally PSUN posted a wider first-quarter loss of $37.1 million, or 53 cents per share on lower sales and a charge related to the closure of a facility. However the loss was in line with analysts’ predictions. Technically PSUN is oversold and the following indicators show that.

Current RSI = 24.46
Current MFI = 14.58
Current Slow Stochastics = 4.59

Entry Price = $8.93
Exit Price = $9.43 (Meaning a 5.5% profit)
Stock Price = $9.14 (Up 2.35% for now)