Retail Reversals – Just in Time for the Holidays

Going through charts this weekend it was hard to miss the huge moves some retailers have been making.  A lot of these companies have been left for dead but they are showing showing signs of life lately.

A few, like Hibbett Sports, Inc. (HIBB), were on my watchlist but rocketed way past my buy zone on better than expected earnings. HIBB went all the way to fill its gap from the summer just under $20 before giving some back.  I’ll keep my eye on it but don’t like the risk / reward of entering it here.  There are some setups I like better which I will go through below.

First up is Dick’s Sporting Goods, Inc. (DKS).  I pointed out the momentum divergence a few weeks back but stayed away until the their earnings report was out and price started to confirm.  As a side note, I’m not a huge user of indicators and typically trade based solely on price action.  However, I will use some momentum indicators (usually MACD and MFI) on longer term charts mostly, to help determine potential trend changes.  Here’s the weekly chart of DKS:

8CA20669-A6AC-4A16-ADC1-F163D9EA15BBYou can see here how as price made lower lows in October and early November that momentum was actually improving – or diverging vs. price.  Again, this is not a buy signal for me unless price follows.  In this case it has.  I like DKS here over the highlighted area and can see it potentially moving up the the low to mid $30’s to start.  Here’s the daily chart for a closer look:

E5929486-8CD6-45CD-809F-9FD89B2B8F2AIt’s worth noting DKS is currently trading at a discounted PE of 10.63 vs. a 5 year average of 17.92 according to YCharts.

Next up let’s look at Francesca’s Holdings Corp. (FRAN).  The setup on the weekly is very similar to DKS.  Earnings on this one aren’t scheduled till 12/5 so we should take note of that.  Here’s the chart:

C5E5843C-7310-42C4-869A-D35A9B70530DI like the potential.  Here’s the daily for a closer look:

055FBD4F-BB83-43E1-9E78-6596AFCB8A25Very nice!  Also similar to DKS, the PE here is a very low 7.66 vs. a 5 year average of 17.87 according to YCharts.

DKS and FRAN are two of my favorites but I also have a close eye on the following:

5F65EF0F-26DF-4542-AA72-8B38CF3EF5018B62E198-7750-4ED7-B36E-9F4C860EF26548A75FA5-7D93-439F-BB9A-EB1DF3C03CD6These have earnings coming up so I’m more in watch mode on these.  Also, it’s important to point out none of these names are in established long term uptrends.  You have to start somewhere though right?  The key, as always, is managing your risk and getting out if the market doesn’t cooperate.

Take care and have a great weekend!

 

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