Footlocker (FL) vs. Green Mountain Coffee Roasters (GMCR) vs. Deckers (DECK).
Discussed in this article: Foot Locker Inc. ( $FL )
I want to look at Foot Locker ( NYSE:FL ). The company announced earnings on Friday and guess what? They’re pretty good, right? Look where the stock opened up, by the way, I forget whether they announced on Thursday night or Friday morning, but the bottom line is, when the market opened today everybody knew what the earnings were.
The stock gapped way up above real established resistance, four times, actually five times the stock tried to push above there, and then we got a big, massive gap. Now, this wasn’t a gap that you wanted to buy, and of course it’s obvious now, it’s easy to say, “Oh well yeah, that’s what you’re saying now, but what would you have said then?” I would say the same thing for this reason, the stock has already run quite a ways, it had already run a lot.
Look at how the 20-day moving average was really, really steep, the 50-day as well, so this had already had a big run. When they announced earnings, short interest wasn’t an issue, but they announce earnings the stock gaps up this high. Think about this, all the folks that bought here, why do you think they bought it? Just because they like Foot Locker ( NYSE:FL )? No, because they’re expecting good numbers. So you’ve got folks that were long at 30.00, 33.00, 34.00, 35.00, suddenly the stock gaps all the way up to 39.00 where they had bought just a few weeks earlier. That’s a move that’s going to be sold into it was already well extended.
Now compare that with Green Mountain ( NASDAQ:GMCR ). I covered this, I think it was Wednesday evening in the Free Chart video, you can go check it out, at the time this stock was trading up after hours and it was right around this level here, right around 64.00ish, something like that, and I was saying you know what? They announced good earnings, but the stock isn’t really trading up enough, it’s not even trading above this resistance level here. And so this is a stock I think you don’t want to buy, you don’t want to buy it because it’s not even gotten above the resistance level.
I also mentioned by the way, if the stock moves above 65.00 then basically not, forget what I just said because it was wrong. But what I didn’t say, and I just wasn’t thinking about it at the time, my bad, look how tight the stock had been squeezing, see it wasn’t extended, it wasn’t really extended, it already had a major sell-off here, it wasn’t extended, and so the stock gaps up, and you look at it from the get-go, like right away, two minutes, three minutes into the market the stock is moving higher and that would have turned out to be a really good trade.
On the other hand Foot Locker ( NYSE:FL ) had already had a big move, gapped way up, and I’m talking just a few minutes into the market you know the stock is drifting lower. So these are two gaps, one Foot Locker ( NYSE:FL ) here, is a gap in crap, the other Green Mountain Coffee Roasters ( NASDAQ:GMCR ), call it what ever you want, gap in go, gap in run, whatever. So they’re two different ways to trade gaps depending on where the stock was prior to the move. With Foot Locker ( NYSE:FL ) would I buy that? No I’d probably by Deckers ( NASDAQ:DECK ) instead. You know why? It’s working, Foot Locker ( NYSE:FL ) probably has some more work to do.