Foot Locker (NYSE: FL)

Foot Locker, Inc. is a global retailer of athletic shoes and apparel, operating 3,369 primarily mall-based stores in the United States, Canada, Europe, Australia, and New Zealand. Foot Locker operates in two segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment is an athletic footwear and apparel retailer in the world, whose formats include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction, and CCS. The Direct-to-Customers segment reflects CCS and Footlocker.com, Inc., which sell, through its affiliates, including Eastbay, Inc., to customers through catalogs, mobile devices, and Internet Websites. Its marketing channels include broadcast, digital, print, and sponsorships of various sporting events. The company operates four distribution centers, of which two are owned and two are leased, occupying an aggregate of 2.4 million square feet.

To review Foot Locker’s stock, please take a look at the 1-year chart of FL (Foot Locker, Inc.) below with my added notations:

After trending higher for most of the last year, FL has been consolidating within a small Rectangle over the last 2 months. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For FL, the Rectangle pattern has formed a $32 resistance (blue) and a $30 support area (navy).

The Tale of the Tape: FL has formed a small Rectangle pattern. The possible long positions on FL would be either on a pullback to $30, or on a breakout above $32. The ideal short opportunity would be on a break below $30.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

 

Good luck!

Christian Tharp, CMT