RH certainly has been a momentum stock. I like the business model and competitive barriers. The stock is rolling over today on disappointing forward guidance, relative to street expectations, and concern about the broader housing market. This selloff took place in the context of the recent secondary featuring high insider selling. The technicals are also signaling caution. RH is now below the 20 and 50 day SMA, the 5 day EMA is close to crossing lower than the 13 day, and ditto the 12/26 MACD over the 9 day. All of this is confirmed by high volume not seen since July 12.
The external environment over the next two weeks is perilous. Next week the Federal Reserve decides on tapering, the week after congress tackles the extension of US debt limits, and Syria remains a near term wild card.
Absent positive company catalysts, unlikely since RH just reported, RH could test July 29 low’s of $ 63.89, before the end of September. Fortunately, I profitably sold my position in RH on September 6 and look to re-enter at a better risk adjusted price in the high $ 63- low $ 64 range. My thesis changes if the stock decisively reverses it’s 10%+ correction.
Very high Short % of Float of 168%, and stops triggering sells are feeding each other and driving the stock lower on high volume. The short term momentum is decidedly negative. Medium term, I agree with your positive thesis, but the next several weeks are likely to be challenging for RH.
Two additional data points are telegraphing caution. RH further drop in the after market is confirming the nearly 12% correction in standard trading hours. The Sept 21 and Oct 19 Put Options, show the strongest open interest @ $ 60-$ 65. Unless the stock reverses tomorrow and wipes out today's correction, the negative momentum combined with several external road bumps over the next several weeks, suggest RH could test $ 63's support levels, before resuming it's growth trajectory.