The weak bulls got flushed out of this stock last Friday (3/22). Now it’s ready to shoot higher.
This is a classic case of a good stock getting sold because another stock in the industry has bad news. When this happens, the good stock bounces right back and then continues higher
Click here to see this great-looking chart and trade on the ‘good company.’
The good company in this story is Foot Locker (FL). The company with bad news was Nike.
Nike is a great company and stock, but its earnings disappointed traders last Thursday and the stock got hit.
This negative sentiment prompted weak holders of FL to sell also.
That was a bad move. FL landed on solid support and immediately rallied.
Since this selloff and rally occurred right on the 50-day moving average, this is a great looking ‘buy the dip’ trade with an opportunity to have your stop under the 50-day average.
Furthermore, a move over 61.50 will represent a breakout of a month-long consolidation.
So the setup is to be a buyer over 61.50 with a stop under 58.50. If you’d like a tighter stop, under $59 should also work.
There’s also a bullish big picture behind this trade. If look at the FL weekly chart you’ll discover that the pullback in March is a retracement back to a big weekly breakout of the $61 price level and the 200-week moving average!
This means that if FL gains bullish momentum here, it could run to the $70-$75 range quickly.
If you understand how to trade options, and you’d like to turn a move like that into a potential 300% gain or more, consider the August 70 calls.
Rick Nartarian, Chief Investment Officer
The American Investor Daily