Floor & Decor Holdings Inc. (FND) could rally, but I do not think it can soar. Why do I mention that? I saw an email here on Friday with a recommendation to go long FND because it was ready to "soar." I don't mind colorful or inspired language, but in the financial services industry you need to remember the omnipresent compliance people -- a true growth industry, by the way.
For I don't know how many years, someone on another floor or in another building in Manhattan and even in Delaware would read my commentaries on the stock market. They would read my presentations to sales offices and to clients. Everything was read by an SA (Supervisory Analyst, who has passed the Series 16 exam) before it saw the light of day. This team of overworked people never got any praise but no one ever complained to them in person or out loud or heaven help you. You couldn't go around them so you had to make whatever changes they wanted. Live with it. To this day I never use the word "bet" in a commentary. "Bet" gives someone the wrong connotation, so when I read someone else's commentary that FND is going to "soar" I get a chill. Let's look at some charts and warm up bit.
In this daily bar chart of FND, below, we can see some positive price action and some improvement in the indicators. FND was in a downtrend from April to the end of October. Prices bounced to early December and then we saw a retest of the October low. FND held the prior low and rallied. In February FND finally broke above the December high to complete what could be considered a small double-bottom pattern. The height of this pattern when projected upward from the breakout gives us a $45 price price target. A rally to around $45, should it develop, would only fill a bearish gap from early August when FND was in a downtrend.
Yes, FND is above the rising 50-day moving average line, but the 200-day line is still in a downtrend. There was heavy trading volume at the October low, suggesting that discouraged longs threw in the towel, but I don't see a pattern of expanding volume from November. The daily On-Balance-Volume (OBV) line bounces in November and made another low in December. The subsequent move up in the OBV line does not confirm the price action in that the OBV line has not broken above its December peaks. The Moving Average Convergence Divergence (MACD) is above the zero line but is poised for a possible bearish crossover to the downside.
In this weekly bar chart of FND, below, we don't have that much price history to work with. We can see the decline. The small double bottom pattern. The rally above the declining 40-week moving average line. The modes move up for the weekly OBV line and a cover shorts buy signal at the end of 2018.
In this Point and Figure chart of FND, below, we can see an upside price target of $43.81 which is short of the top of the gap. A decline to $36.02 would be bearish.
Bottom line strategy: What is the point of this analysis? It is not an attempt to show up another analyst because on any given day I can get it wrong. It is to give you another point of view and to get you to think about the words out there in the media. Investing is a business and not entertainment.