American Apparel is Over the Hump(s); Now It's All About Timing (APP)

Two weeks ago, yours truly penned some bullish thoughts on American Apparel Inc. (NYSEMKT:APP). Although the stock was in an "almost" situation at the time, APP shrugged off the "almost" condition the very next day and confirmed its bullishness. It's possible even that bullish feat wasn't convincing, but after yesterday' and today's action, it's going to be impossible to decide American Apparel still isn't over the hump.

Just as a refresher, as of the 26th (see the blue arrow), APP had already completed a strong inside day reversal pattern, and was working on logging a good follow-through day. The only thing we really needed to see at the time to put the finishing touches the budding breakout from American Apparel at the time was a break above $0.78. Well, we got it the next day... in spades. Blasting past $0.78, the stock went on to clear the 200-day moving average line (at $0.93) with that day's 32% leap.

It was, of course, too much and too fast, and sure enough, APP peeled back the very next day and wouldn't be able to move back above the 200-day line for a week and a half. Still, a major milestone had been passed, and the stock was still in the hunt for another milestone moment....

....which came yesterday, with the second (and more sustainable) push above the 200-day moving average line.

The move was underscored - admittedly too much - with today's bullish gap and 5% gain (as of the latest look anyway). That gap and the oversized gain are likely to pull American Apparel Inc. shares back to less alarming levels soon, but not low enough to snap the uptrend. Once the gap is closed and as long as the 200-day line holds up as a floor, this entire breakout process can be taken at face value and APP can be bought. Just shop around to make sure it's being bought at a short-term low.

The weekly chart of American Apparel offers some perspective on just how much upside may be in store here. The stock was trading around $2.00 when a wave of turmoil hit last August. The company's arguably in a more encouraging condition now than it was then, so it wouldn't be a stretch to see a push back to that area.

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