Yesterday we discussed the criteria needed for a valid long setup, using STMP and CARB as examples. Let’s take a look at a few more candidates that show potential.
Nike Inc. (NKE) has been building a rounding bottom pattern over the past few months, with price crossing above the rising 9/20ema. RSI is rising along with MACD. Momentum is bullish, with price finding support at the 20ema on this recent pullback. VBP support and resistance are obvious, lending to a target at VBP resistance and the 200ma at 54.50. Earnings are slated for March 21.
Competitor, Skechers (SKX) is showing similar bullish action as the stock heads into earnings on February 8. Volume is less convincing. If SKX manages to move above the 200ma that would lend support to the industry group as a whole. This is not a setup. We are referencing the competitors to Nike Footwear for comparison.
Footlocker recently broke its 2016 bullish trend. Price is meandering around the breakout level, which shows confluence with the VBP support zone (HL). MACD histogram suggests the bears are exhausted. If RSI tilts upward and price accelerates, it can only help the industry group. Note the SAR buy signal hovering overhead. Remember, in the Monday post “What Makes This a Good Setup?” we discussed how stochastic turns before price. As prices continue to close ever higher in its daily range, the effect forces stochastic to change directions. Price is below the 9/20ema, so that needs to change. The end result should be shift in sentiment towards Footlocker, as earnings approach on February 17.
While there are no guarantees that Nike will bolt higher, this process is outlined so that you become more proficient as a trader. Our edge consists of a mechanical process that can be repeated.
- Price above the 9/20ema
- MACD and STO turning higher with RSI
- Volume showing institutions are involved
- SAR buy signal imminent
- Sector performance (XLY bullish)
- Market internals confirm – market bullish (A/D NYUD TICK TRIN)
Happy Trading – CV
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Watch List for the Week of 01-16-2017