How Dick’s Sporting Goods Can Rally 10% After Earnings

Dick's Sporting Goods could rally 10% up to former resistance and a big breakout level. But the stock needs to gain post-earnings traction.
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Dick's Sporting Goods  (DKS) - Get Report is up slightly after reporting its first-quarter earnings on Tuesday before the open.

It’s a mixed reaction to a mixed quarter, with shares now up about 1% on the day. At one point, Dick’s Sporting Goods stock was up almost 5% on the day. At another point, it was down about 1%.

Investors are still trying to digest the results, where the company reported an adjusted loss of 62 cents per share, missing estimates by 5 cents per share. Revenue tumbled more than 30% to $1.33 billion, which narrowly topped estimates by $30 million. Same-store sales were hammered too, down 29.5%.

The headline numbers aren’t good, but there are some silver linings.

First, e-commerce sales are surging, while same-store sales are down just 4% year-over-year for the current quarter as Dick’s has reopened almost 80% of its stores.

Put another way, same-store sales are hardly down despite more than 20% of the retailer's locations being closed. Let’s look at the charts.

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Trading Dick’s Sporting Goods Stock

Daily chart of Dick's Sporting Goods stock.

Daily chart of Dick's Sporting Goods stock.

Dick’s is in an interesting cohort of retail. It’s not like Target  (TGT) - Get Report, Costco  (COST) - Get Report, Walmart  (WMT) - Get Report or Amazon AMZN, where sales are strong. But it’s not being pushed to the edge like Macy’s  (M) - Get Report or J.C. Penney  (JCP) - Get Report.

We’re seeing that reflected in the stock price, too — where shares are neither struggling nor surging. That said, shares have traded well from the March lows.

Ideally, bulls will be able to hold Dick’s Sporting Goods stock over the 200-day moving average. Above that mark and a continued push higher is possible.

My upside target in DKS stock is the $40 to $42 area. There it finds prior fourth-quarter resistance near $40, which is about 10% above current levels. A push above this level puts the 78.6% retracement in play, at $41.24. Above $42 puts $48-plus in play.

Should the 200-day moving average fail to act as support, bulls will want to see the 61.8% retracement at $35.25 and the $34 level hold as support. Below puts the 20-day moving average in play, followed by the $31 to $32 level.