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How Far Dick's Sporting Goods Can Rally After Huge Earnings Beat

Dick's delivered a lights-out earnings report on Tuesday after the close. Here's how to trade the stock at all-time highs.

Dick’s Sporting Goods  (DKS) - Get Dick's Sporting Goods, Inc. Report is enjoying a splendid day on Wednesday, up more than 14%.

The move comes after the retailer's better-than-expected earnings results and builds off the premarket gains we saw before the open.

After the close on Tuesday, Dick’s delivered a top- and bottom-line earnings beat, while guidance was robust.

But that’s not all. Same-store-sales growth of 19% crushed expectations of 5.4%. Earnings almost doubled forecasts, while the board approved a special dividend of $5.50 a share.

This was a lights-out quarter from the Pittsburgh sports retailer.

As the indexes continue to grind near the highs ahead of an important Fed meeting, Dick’s came storming into the building with a report worth buying.

That's why it's one of the top gainers on the day

Trading Dick’s Sporting Goods Stock

Daily chart of Dick's Sporting Goods stock.

Daily chart of Dick's Sporting Goods stock.

The stock gave bulls a strong three-day rally ahead of the earnings. That’s after a quick pullback nearly sent Dick’s Sporting Goods stock down to the 50-day moving average and the prior breakout level near $102.

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It’s never easy to be long a stock that has rallied strongly when a binary event like earnings is coming up.

For those that had this one, they are being handsomely rewarded. But it all begs the question: What comes next?

It’s not an easy answer.

Despite the stock's move to all-time highs, there is a bit of divergence on the Williams%R reading at the bottom of the chart. That alone isn’t a reason to sell and right now we don’t have a reason to be net sellers.

But this divergence is worth keeping an eye on, particularly if Dick’s Sporting Goods stock drops below Wednesday’s low (currently at $128.80).

Below that mark puts the 261.8% extension in play, near $123.50. Ultimately, bulls should be looking to buy the dip in this one. But determining the size of the dip is the hard part.

In this regard, keep an eye on the 10-day moving average, which should buoy the stock if it’s tested.

On the upside, a move over Wednesday’s high opens the door to $140 and the 423.6% extension of the recent range, up near $145.

Trading these types of moves is never easy. What traders need to do is find a solid risk-reward setup. 

That comes either by buying the dip at areas that should be support, or by waiting for rotations up through key levels, potentially unlocking higher zones of interest.