Levi Strauss could find support at $18. Slump in discretionary spending still a challenge

Levi Strauss & Co. (NYSE:LEVI) has been under pressure since May 2021. Analysis shows that the stock may have hit a support level at $18. This week, the price has been trending upward, closing 16.30% higher. The question is what investors should do now that the price is rising.

Levi Strauss has been under pressure in the stock markets. Growth in earnings during the last release was not strong enough to change the sentiment on the firm. In the current quarter, the company expects to grow its sales as consumers adjust wardrobes following an extended period of staying indoors. However, Levi Strauss still faces the problems of inflationary pressure that may limit how much it benefits from growth in demand.

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Being a consumer discretionary stock means Levi Strauss is not able to easily pass the costs of inflation to buyers. Still, the company faces competition from counterfeits. While there is regulation trying to combat counterfeits, it is not clear how much such law will benefit the firm.

Levi Strauss at $18 reference support but not yet a buy

Price analysis shows MA 10 below MA 20 and MA 50 in that order. The divergence between these averages does not seem to decline. The implication is that Levi Strauss could still edge lower. From the MACD, the stock has evidently maintained a low divergence from the signal. This divergence has not changed at all in the history of the firm. The RSI, however, shows that the stock could be starting a bullish pattern. Should the RSI maintain the momentum this week, then Levi Strauss would break away from the prevailing downward pressure.

Summary

Levi Strauss may record growth in demand. The stock finds potential support at $18. However, it is not yet a buy.

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