Will Foot Locker (FL) Stock's Recent Rise Take a Timeout?

The athletic apparel retailer may find support in the $55 area.
By Bruce Kamich ,

NEW YORK (TheStreet) -- Trifecta Stocks holding Foot Locker (FL) - Get Report shares have been under pressure this fall, turning the short-term and longer-term chart pictures negative.

This short-term chart of FL is interesting. In the chart above, we can see a peak in the On-Balance-Volume (OBV) line in August, which preceded the price peak in September. The September price peak was followed by a decline for FL below its 50-day and 200-day moving averages. Also note that the rate of selling increased since August -- in that we have lower and lower momentum readings in the lower panel. Any further reflex rally is likely to run into technical-based selling at the underside of the 200-day moving average.

After more than doubling, this chart of FL, above, has turned lower. The Moving Average Convergence Divergence (MACD) oscillator has given a crossover sell signal just as prices moved below the 40-week moving average. Key support for FL at $55 is likely to be a magnet from here.

TheStreet Ratings team rates FOOT LOCKER INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate FOOT LOCKER INC (FL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • FOOT LOCKER INC has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, FOOT LOCKER INC increased its bottom line by earning $3.56 versus $2.85 in the prior year. This year, the market expects an improvement in earnings ($4.20 versus $3.56).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 29.3% when compared to the same quarter one year prior, rising from $92.00 million to $119.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FL's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • You can view the full analysis from the report here: FL

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

Loading ...