Monday we reviewed DKS ahead of its earnings release Tuesday. We wrote that "DKS has largely traded sideways, but the OBV line suggests some long and strong buying. If this volume indicator is correct, then at some point in time DKS could rally to the $50-$55 area."
Prices have reacted downward Tuesday morning. Some traders may have sold in reaction to DKS's earnings release, with the sports retailer having reported a 6.5% decrease in net sales in the fourth quarter. Meanwhile, non-adjusted same-store sales fell 3.7% in the fourth quarter, nearly doubling the decline felt in the year-earlier fourth quarter.
I find that it is not helpful to try to analyze the news, but it is helpful to see how prices react to news.
In this daily candlestick chart of DKS, below, we can see Tuesday's gap lower (the Japanese call it a "window"), but we also see prices are above the opening and the candle bar (so far Tuesday) is white or bullish. Prices don't have to close higher on the day, but the fact that someone bought the opening is a positive for chart readers like myself.
Bottom-line strategy: Investors are forward looking and suspect that DKS will resume its uptrend in the weeks ahead.