Foot Locker just came within striking distance of a historically bearish trendline
Foot Locker, Inc. (NYSE:FL) stock's struggles on the charts aren't being helped by today's selloff on Wall Street. Yesterday, the shoe retailer managed to close above $31 for the first time since March 29. However, FL was last seen 4.8% lower, trading at $30.43, and now sits more than 29% below its year-to-date breakeven mark. And things looks like they could get a lot worse before they get better, as the equity just came within striking distance of a trendline that's yielded bearish results in the past.
The trendline in question is Foot Locker stock's 70-day moving average. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, the stock has come within one standard deviation of this trendline five other times in the past three years. The shares saw a negative one-month return after 80% of these signals, and averaged a 10.5% drop during that time period. From its current perch, a similar move would put FL just above the $27 level -- a chip shot away from its annual low of $26.36.
Meanwhile, Foot Locker is set to report its first-quarter earnings before the open on Friday, May 20. Looking back, FL fell lower following five of its last eight reports, including a 29.8% drop in February. Regardless of direction, the security has averaged a 9.3% next-day swing, which is more than half the 20.6% move the options pits are pricing in this time around.
Speaking of, bearish options players are coming out in droves ahead of Foot Locker's quarterly confessional. At the session's halfway point, 5,634 puts have been traded, which is six times the intraday average. Most popular is the May 28 put. New positions are being opened here, indicating these traders are expecting even more downside by the time this contract expires on Friday afternoon.