Five Below Inc. (FIVE) reported a first-quarter earnings beat and it is trading higher in pre-market activity here on Thursday -- two reasons for it to be the Stock of the Day on Real Money. Five Below reported earnings per share of 46 cents, which is up 18% from a year earlier and well ahead of the consensus EPS forecast of 35 cents. Let's check out the charts and indicators here on Thursday morning to round out the picture.
In this daily bar chart of FIVE, below, we can see that prices have oscillated higher from their December low. FIVE has crossed above and below the rising 50-day moving average line while staying close to the rising 200-day moving average line. Prices made new highs for the move up in April and May, but the daily On-Balance-Volume (OBV) line has failed to move above its high of September. This is a bearish divergence that might be hard to see but it is a warning sign for traders. The trend-following Moving Average Convergence Divergence (MACD) oscillator moved below the zero line in May for a sell signal. The oscillator is still in bear territory.
In this weekly bar chart of FIVE, below, we can see a very strong move higher the past three years but some weakness is showing its hand lately. Prices are above the 40-week moving average line but the line is cresting, which tells us that the pace of the rally has slowed. The volume patterns this year do not show increased activity to confirm the new high and the weekly OBV line is rolling over the past two months, suggesting a shift to more aggressive selling. The MACD oscillator on this longer time frame just crossed to the downside again for another take-profits signal.
In this weekly Point and Figure chart of FIVE, below, we can see part of its long rally and a potential downside price target of $109.
Bottom line strategy: Shares of FIVE could bounce here on Thursday, but the overall technical condition of this stock was weak before the earnings announcement so I would be alert for further declines and a break of the 200-day moving average line.