Shoe Stock Looks Ready to Jump

12/28/2011 9:00 am EST


Athletic shoe retailer Foot Locker (FL) has maintained a steady run higher since the summer months, and with strong support below, the stock may soon swing higher within the confines of its trading range.

Shares of Foot Locker (FL) have been trending quietly higher within an established channel over the last five months, allowing for great entries along the way. This could be another one of those opportunities. Here's why.

The daily chart shows FL has developed a clear, upward-sloping channel over the last five months of trading. With clear trend lines above and below price, buyers and sellers have had a great blueprint for buying and selling this stock.

If the last five months hold true, we could see another swing higher within the boundaries of the channel over the next two weeks.

Click to Enlarge

The daily chart also shows a major zone of confluence, which is offering great support for the month. Namely, price is testing three-way support of the monthly pivot range, monthly "Value Area High," or VAH for market profile traders, and quarterly Volume-Weighted Average Price, or VWAP.

The fact that price has formed two bullish reversal candlesticks at this zone in successive days is indicative that buyers are defending this area of support, which could provide the fuel to boost price to the top of the channel.

The Trade

If price remains above the two-day low of $22.50, we could see a steady climb to major resistance at $25.30, which has held since May. Look for a push through $23.50 to initiate a trade.

If $25.30 is breached, look for price to max out in the $26-$26.50 range before re-testing a higher low.

By Frank Ochoa of

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