TRADE INSTRUCTIONS
Date: August 21, 2017
Name: Francesca’s Holdings Corp.
Symbol: FRAN
Type: Close
Limit: Sell at market              

TRADE RATIONALE
FRAN closed beneath my stop loss price of $7.85 today, so by rule I must close out this position and remove it from our portfolio. The stock dropped more than 10% after the company issued a press release stating that its Chief Merchandising Officer is leaving the company, presumably due to the poor “back to school” sales results referenced in the announcement. On the positive side, the company also confirmed that it would come in above the consensus estimate for earnings in the quarter ended last month but concern over the current quarter is driving the stock down.

A small-cap stock like FRAN ($270 million) is subject to extreme fluctuations in value, so today’s reaction is unfortunate but not as unusual as it may appear. For the same reason, it most likely will experience above-average volatility in the days to come as the short-sellers determine when to take profits. With more than six times its average trading volume occurring today, my guess is the stock will gradually drift back up over the next couple of weeks.