DKS at a Yearly Low
Dick's Sporting Goods (DKS), once one of the more resilient retailers, has kept sliding. It made a fresh yearly low yesterday and has bounced just under 2% off that level. Over the past 251 trading days it is down 19.7%, while the XLY consumer discretionary ETF is up 3.2%. XLY is a weak comparison though, since it holds many other things.
Placed on a chart against other retailers that reported this week, DKS sits near the bottom, close to Home Depot (HD) and Lowe's (LOW). Recent retail earnings showed no clear common theme, other than consumers still feeling the pinch in a hard environment. Tariff worries weigh on many of these retail names.
The Chart
DKS trades in a downward sloping channel. The high is 244.38, with a trend line drawn across the highs. A brief breakout faded fast. Yesterday's low was 176.7. There is a gap from 187 to 189 where price opened, and it lines up with a series of earlier lows, making that zone a notable area to watch to the upside into earnings. A steeper, sharper downward trend line off the odd high upswing is still in play.
The decline has been very sharp. The steeper a one-direction move, the harder it is to hold. That does not rule out a move lower; the drop has already been severe.
For the pre-earnings setup, the 5-day EMA (dark blue) comes in at 190.2 and lines up with the trend line. RSI is moving into oversold. RSI usually goes muted and sideways heading into earnings, so a fresh push lower is not what you would expect or want if you are bullish. The volume profile shows a node at 190 to 195, and volume was heavy yesterday during the drop, marking that as the key volume zone.
Options and the Trade
Earnings land Tuesday morning. DKS has no weekly options. The expected move for the September 18th monthly is about plus or minus 12.2%.
Given the environment, no insider buying, and notable insider selling, one bearish example trade: buy one September 18th 170/160 put vertical for a 3.25 debit, 28 days to expiration. Max loss is 325 (the debit paid), max profit is 675, roughly a 1-to-2 risk-to-reward. Break even sits at 166.75, almost 8% to the downside, against the 12.2% expected move. The setup bets on continued weakness.
Today DKS is pacing for a modestly higher open, which could break the eight-session losing streak that ran through Thursday.
