Foot Locker (FL) opened sharply higher Monday in reaction to a top line and bottom line beat in their Q4 numbers, but that optimism quickly slipped away as traders focused on a soft earnings outlook.
Let's check out the charts.
In this daily bar chart of FL, below, it is now down on the day and trading below the 50-day moving average line. The On-Balance-Volume (OBV) line shows weakness from early February and tells me that sellers of FL are being more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is moving below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of FL, below, I see a mixed picture. Prices are trading above the rising 40-week moving average line. The latest candle pattern shows a lower shadow which would be positive except that this week's candle is starting off with a rejection of the highs.
The weekly OBV line shows a decline beginning in late January. The MACD oscillator has narrowed in recent weeks and tells me that the trend strength is weakening.
In this daily Point and Figure chart of FL, below, I can see an upside price target in the $51 area. A trade at $39.39 could weaken the picture.
In this weekly Point and Figure chart of FL, below, I see an upside price target in the $61 area. A trade at $39.00 could weaken the picture.
Bottom line strategy: Monday's price action looks pivotal with a large reversal to the downside after a strong opening. The risk is for further selling. Avoid the long side for now.
