Guess Who Bought A Lot of This Stock Yesterday!

As pressure mounts in the trade talks with China, some stocks are clearly nervous, but others are demonstrating a desire to go higher.

Yesterday I gave you a simple, short-term trading tactic to identify these bullish stocks.

Today’s trade ideas a classic buy pattern and yesterday’s powerful tactic.

One of the best indicators of major institutional support is the 200-day moving average. It’s even stronger if the average is sloped up.

You should never blindly trust that the average will provide support for a falling stock, but when a stock reacts to it, you can trade it.

A strong bounce off of the 200-day average can lead to a quick short-term trade and a great long-term entry.

Foot Locker (FL) looks like it could provide both of these trades.

As you can see from the chart below, yesterday FL bounced off of its 200-day average on the biggest volume it’s had in two months.

Furthermore, it traded above the high of the last 2 days.  

This is very bullish action considering the market closed down on the day.

This pattern sets up a trade stop under the 200-day average. I’d use under $53.

Normally, I’d suggest waiting for confirmation of it trading over yesterday’s high of $56.48 before entering, but in this case if it pulls back to the $54.50-$55.00 range that should be good support, and would offer a lower cost entry.

Therefore, for the short-term trade, look to enter around $55 with a target at $59 and a stop under $53.

If you’re looking for a bigger trade, then your entry zone is $54.50 – $57.00 and you’re playing for a move back up to $65 and beyond.

FL may be able to weather short-term pull backs in the market, but I would not expect it to hold up in a significant market decline so be sure to adhere to your stops.

If the current market pullback leads to a continuation of the market’s uptrend, this will be a great entry.  

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily