The Foot Locker Dropper FL is a Study in Big Trend Reversals
Wed, Jul 5, 3:11 PM ET, by Corey Rosenbloom
Foot Locker (FL) collapsed from the highs, turning the trend quickly from up to down (bull to bear).
How’d it happen and what specific steps did price take ahead of the reversal?
Let’s use FL as a quick study in modeling long-term trend reversals:
Foot Locker gives us a textbook study in trend progression.
Trends begin from a period of stability or “Accumulation” (2008 to 2011) and move to a period of steady/stable upward action on rising volume and momentum.
We call this “stable rise” the “Realization” or “Mark-Up” phase and for FL, it lasted from the 2011 breakout to the 2015 first high near $70.00 per share.
Momentum began to diverge, price formed a flat/sideways trading range, and bearish volume increased during the final phase or the Distribution phase through 2016 into 2017.
Let’s focus our attention on this 2016/2017 “second rally” toward the new trend high.
Red or SELL volume INCREASED during the 2016 sell-off which is a classic sign of early Distribution.
This type of action – along with the DECLINE in buy/bull (green) volume (red arrow) on the 2016 rally further hinted that DISTRIBUTION was taking place as price pushed higher on weaker volume.
The negative momentum divergence on the new price high above $75.00 per share was another major clue that “all is not well” with the bullish uptrend.
In fact, volume with momentum sent signals that price was likely under large-scale distribution.
This suspicion was confirmed with the massive sell-swing or collapse lower (“Aggressive Distribution”) recently that sent price plunging from $75.00 to $50.00 per share.
FL reminds us to monitor price within the Charles Dow Model of Accumulation/Realization/Distribution along with the messages from momentum and volume.
Focus on stocks in stable, rising trends within the Realization Phase and avoid stocks showing signs of Distribution.
Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
Corey's book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).”
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