Burlington Stores Inc. (BURL) is surging sharply higher in pre-market trading today. We looked at the charts and indicators of BURL last month, and we concluded our analysis with these thoughts: "BURL has rolled over the past four months and is testing the cresting 200-day moving average line. Old longs should protect their profits and new longs should be very patient and keep their powder dry."
BURL weakened into the middle of August and then firmed back to the underside of the declining 50-day moving average line. This morning it looks like BURL is retesting the 200-day moving average line. Let's dig deeper into the charts and indicators to see if this strength is sustainable.
In this daily bar chart of BURL, above, we can see the price action leading up to today's rally. Prices peaked in May and corrected for three months, which is not a long period of time, but about "average" for BURL when we look at the weekly chart below. The 50-day moving average line recently crossed below the rising 200-day moving average line for a dead cross. Like pretty much all moving average signals, this bearish crossover is well off the top.
The daily On-Balance-Volume (OBV) has been generally pointed lower since early July, but it diverged when BURL declined to a new low around $80 and the OBV line did not fall to a new low. This small bullish divergence is probably too small to really make a difference.
In the bottom panel is the 12-day momentum study, which shows a bullish divergence from June to August as momentum made higher lows when prices made lower lows. This divergence tells us that the pace of the decline slowed ahead of Thursday's strength.
In this weekly chart of BURL, above, we can see the price action up to Thursday's early move higher. Prices are testing the underside of the still-rising 40-week moving average line. You should be able to see that BURL made other corrections lasting two to three months.
The weekly OBV line has been declining since May and the Moving Average Convergence Divergence (MACD) oscillator is still below the zero line (bearish) and not narrowing much. Thusday's price action could move the MACD oscillator closer to a cover shorts signal.
In this Point and Figure chart, above, we can imagine how the chart will change. We are likely to see a breakout over $89.07, which may open the way for a potential rally to around $105.
Bottom line: we can find some bullish divergences on BURL in the recent price action, but the stock has a decent track record of filling gaps. Keeping that in mind, we'll see how BURL acts after today and see if we want to buy the pullback.