Foot Locker Options Attractively Priced as Shares Continue to Surge Higher

FL shares could see even more upside, if history is any indicator

Managing Editor
Jun 8, 2018 at 12:00 PM
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Retail stocks have been on a tear this week, with names such as Stitch Fix (SFIX) and Five Below FIVE) making notable post-earnings moves. Today, we will take a closer look at shoewear concern Foot Locker, Inc. (NYSE:FL), how it has been faring on the charts, as well as to why now may be an affordable time to bet on FL's next leg higher, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

At last check, Foot Locker stock was up 1.8% at $58.65, fresh off an annual high of $58.99. The new peak comes just after FL received a price-target raise at Wedbush to $63 from $61 earlier this morning. The retailer has had volatile run on the charts, notably experiencing two bear gaps and two bull gaps since mid-August. Regardless, FL has picked up 64% over the past nine months, and gapped back above the 320-day moving average for the first time since May 2017. This surge higher also pushed the stock's 14-day Relative Strength Index (RSI) to an overbought reading of 80 at last night's close.

Daily Chart of FL Since June 2016 with 320MA

Foot Locker stock's Schaeffer's Volatility Index (SVI) is docked at 34% -- in the 12th annual percentile, meaning premium on short-term contracts is relatively cheap at the moment, from a volatility perspective. According to White, the one other time FL has been trading near 52-week highs with its SVI ranked in the 20th annual percentile or lower since 2008, the stock was up more than 6%, on average, one month later. Another rally of this magnitude would put Foot Locker shares above $62.16.

Lastly, FL stock's Schaeffer's Volatility Scorecard (SVS) currently sits at a 95 out of 100. This lofty ranking suggests that FL has handily exceeded options traders' volatility expectations during the past 12 months.

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