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A Rose by Any Other Name … Foot Locker Fed Up With Foetid Diminutives; Vows to Bounce Soon (FL)

Posted on May 16, 2022

Today’s trade is a flier.

Good Jews and loyal Noahides, we’re betting that in VERY short order we’ll pull a 9.00% return on a Foot Locker (NYSE:FL) trade and lose NOTHING if we’re wrong.

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But wait!  How can that be?

Every trade has a downside.  Every trade involves risk, no?

Beats the stench of gym socks…

Anyway, we’re moving in slightly different direction today, friends, insofar as we’re offering pertinent details of our intentions to subscribers only.

Don’t want to give away the farm, don’tcha know.

Not even by hint.

That said, if you’re interested in a FREE 30 day trial, you can certainly access today’s trade by clicking HERE.  [Or just paste the following in your browser: https://www.ajewandhismoney.com/membership/free-30-day-trial/]

It doesn’t cost a thing, and you needn’t front your credit card, either.

Just an email, and you’re rarin’ to go.

A 9.00% gain in a VERY short period.

And guaranteed to lose nothing.

A  VERY.  SHORT.  PERIOD.

Maybe consider going in big…?

It might even cure your asthma…

Anyway, the key to the trade resides in the broad market’s recent decline and the tendency we’re seeing in select names to buck that trend higher.

Yet as we stated above, it doesn’t matter what ultimately happens with FL.  We can’t lose money on this one.  The structure of our initiative guarantees that.

Now look here –

This is FL pasted against the S&P500 during the latest bout of market weakness.

Clearly, FL has outperformed for nearly three full months, and we expect a good pop higher from the stock on any sign of broad market strength – whether it’s lasting or only temporary.

But we may not need even that.

Foot Locker Waiting to Run

The big picture’s as follows –

The company’s stock has been in a downdraft since inflation began its bite late last year.  Traditionally, folks don’t go splurging on new runners when times are tight.

That said, the business remains strong.

Very strong.

Foot Locker beat analyst expectations last quarter by nearly 17% (!), but were punished for not guiding stronger for the rest of the year.  Again, inflation was the great unknown.

More than that, the company recently raised its dividend by 33%, offering investors a proud 5.37% annual cash payout for just sitting tight and opening their pockets wide enough to catch that additional moolah.

As for the rest of the fundamentals, they look like this –

  • P/E is a wan 3.48 – can it get any smaller?
  • Dividend Yield, as mentioned, is a solid 5.37%.
  • Price to Book is a mere 0.91 (i.e., she’s trading below her breakup value).
  • EPS were UP this year by a walloping 179.90%, and
  • Are expected to rise next year by an additional 35.86%, according to consensus.

So why all the glum faces?

We say this one got hammered savagely and without regard to truth, justice or karmic discretion.

Have a look at her chart –

Technically, the following points are relevant –

  1. First, the company will report earnings Friday morning before the bell.  Setting the trade before then, therefore, is imperative.
  2. Now, have a look at both RSI and MACD indicators (in green).  RSI was oversold at the end of February, coincident with the last earnings report, when the stock got hammered.  Price has essentially flat-lined around the $30 mark ever since – even though the broad market is down nearly 10% in the same period.  FL is up a few percentage points (see first chart, above).  A promising sign of relative strength.
  3. Both RSI and MACD are also close to surfacing above their mid-way waterlines (green arrows), an event that would trigger immediate buying by the technical crowd.  We feel that could happen as early as tomorrow.
  4. The gap that opened after the last earnings report (in red) will be filled – if not sooner, then later – and it now coincides with the declining 137 day moving average.  That’s our upside expectation for the stock, though again, it won’t be reached in the days ahead, nor is it a necessary condition for us to profit fully from today’s bet.
  5. Today’s initiative requires only a minor pop in the stock after earnings are reported in order to fulfill its duty.
  6. It’s a five day trade that closes when the market says g’night on Friday.

And it looks like this –

A Jew and His Money recommends you consider setting the FL May 20th covered CALL using the 31 strike, i.e., buy the shares (now at $29.77) and sell the 31 CALL (for $1.45).  Total debit on the trade is $28.32.  Set a STOP sell on the shares at the same $28.32.

Rationale: should the stock rally above $31 by Friday’s close, we’ll pocket a fragrant 9.00% for our efforts.

Should it drop to $28.32, we’ll be sold out in accordance with the open STOP order, and still be holding our short CALL.

At that point, it will be important to set a new STOP buy order on the shares at $31 in order to forestall any loss on the open short CALL.

And that’s it.

You’re done.

Either you walk with 9.00% in five days.

Or you break even.

Or somewhere in between.

We’ll be in touch should anything malodorous arise.

And may the Lord G-d of Israel ever be praised.

Lag B’Omer approacheth…

With kind regards,

Hugh L. O’Haynew

 

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