Foot Locker Inc. (FL) is trading some 4% higher as of Friday afternoon on the back of a fundamental upgrade on the Street, but I'm more concerned with the stock's technical outlook. Let's look at the latest charts and indicators to see if a more positive stance is warranted.
In this daily bar chart, we can see that FL's price has turned up in the past two months:
Prices were in a downtrend from May until November, but gapped to the upside a few weeks ago. Volume also expanded sharply, a sign of aggressive demand.
As you can see in the chart above, FL is now above its rising 50-day simple moving average (the yellow line above), but is still below its declining 200-day SMA (the blue line above). The stock's daily On-Balance-Volume line (OBV) also started to improve in November before prices jumped.
However, a 12-day momentum study of the stock (the bottom panel of the chart above, marked "Momentum (12)") shows lower peaks from November into December. This indicates slowing momentum despite the fact that Foot Locker's price was making higher highs. This is a bearish divergence that can foreshadow price weakness ahead.
Now, this weekly bar chart of FL shows the stock price's up move, but without the price gap (and actually without any base to speak of):
Prices are still below the declining 40-week moving average (the yellow line in the top chart) in this timeframe, while the weekly OBV line has improved since August (which is a positive).
The trend-following Moving Average Convergence Divergence oscillator (MACD) also crossed to the upside in November for a "Cover Shorts/Buy" signal, although an outright "Go Long" signal is a long way away.
Lastly, this Point-and-Figure chart of Foot Locker shows us a small upside breakout and a $54 price target (vs. the stock's roughly $46 at midday Friday):
The bottom line: Foot Locker has improved after a long decline, but it needs to build a good base pattern to get me interested. If FL pulled back to test the rising 50-day average line, I would probably probe the long side at that point.
