Price Patterns - Support Levels May Constrain Price Downsides

bebe Stores (BEBE), a designer and retailer of contemporary women's apparel and accessories, was on a very steep upside that started August 2004. The stock peaked in July 2005 and then collapsed after it announced a slowing in same store sales and earnings.

BEBE is on the price downside but the stock has strong support around $10. Three previous short-term tops around $10 provide the basis for the support line. These tops were resistance above which the stock could not move. But now the $10 level has changed from resistance to support. Often previous resistance levels become support levels. If the stock can stay above the support level, it may start a new upside. Otherwise BEBE would continue on the downside.