Foot Locker Stock Runs Into Technical Trouble Before Earnings

The stock is already eyeing its lowest close in months

by Lillian Currens

Published on Feb 24, 2020 at 1:17 PM
Updated on Jun 24, 2020 at 10:16 AM

Foot Locker Inc (NYSE:FL) is selling off today, following a price-target cut from Deutsche Bank. The analyst cut its estimate to $55 from $59 early this morning, which has sent FL down 3.2% to trade at $37.62, on pace for its lowest close since early September. This comes right ahead of the retailers fourth-quarter earnings report, slated for before the bell this Friday, Feb. 28. Traders might want to proceed with caution before betting on a big break for Foot Locker, though, as the security just ran into some technical trouble that could send it even lower in the short term. 

Specifically, FL just came within one standard deviation of its 80-day moving average after a lengthy stretch below the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, this signal has flashed five times before, and one week later, FL was lower 70% of the time, averaging a loss of 1.86%. On the other hand, one month out, the equity was higher 50% of the time, with an average return of 6.94%. 

FL Chart Feb 24

Meanwhile, Foot Locker's post-earnings history isn't doing the stock any favors either. The equity has suffered negative next-day returns during five of its last eight sessions, including an 18.9% drop last August. The equity has averaged a 12.6% post-earnings swing, regardless of direction during the past two years, smaller than the 16.4% move the options market is pricing in this time around. 

On the charts the shares have been consolidating right underneath their 120-day moving average for months, which happens to coincide with their year-to-date breakeven mark. Considering this, Foot Locker is ripe for another round of bear notes. Coming into today, five of the 14 analysts in coverage still consider FL a "buy" or better, plus, the consensus 12-month price target of $46.24 is a healthy 23.1% premium to current levels. 


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