Foot Locker got roughed up last week.
The footwear retailer tumbled 17% on Friday in its worst one-day decline in nearly two years.
Charts suggest it could see some short-lived relief, says Piper Jaffray chief market technician Craig Johnson.
“I look at this chart and it’s something that doesn’t fit for me from a technical perspective because we have had a big downdraft here in the stock and we’re now really oversold. Look for some sort of little relief rally in the stock perhaps back to $53,” Johnson said Friday on CNBC’s “Trading Nation. “
The stock was up slightly in Tuesday’s premarket, trading at $44.45 a share, so a move back up to $53 marks a 19% rally. However, once any upward momentum is exhausted, it could fall back to new lows, says Johnson.
“I think ultimately we’re going to find good footing in this stock coming in around $40, and if that level fails the next big support level comes in at $30. So not a stock for me at this point in time.”
Foot Locker briefly touched $30 in mid-2017, though it has not traded firmly below that level since 2012. It implies 33% downside.
Steve Chiavarone, portfolio manager at Federated Investors, also sees more pain ahead as the U.S.-China trade war tightens its grip on Foot Locker and its peers.
“Nothing is really more at risk from tariffs than specialty and athletic apparel, particularly footwear. That third tranche of threatened tariffs, that additional $300 billion, if that goes into effect, that can increase the price of a sneaker by 40%,” Chiavarone said on “Trading Nation” on Friday.
Foot Locker, Nike, Under Armour and Adidas, among others, united to urge the White House to reconsider threatened tariffs on an additional $300 billion in Chinese goods. The Footwear Distributors and Retailers of America warned that tariffs could cost customers more than $7 billion a year.
“This is really the epicenter of the trade war or the risk of the epicenter, and we think that’s going to make it hard for the name to rebound in the short run,” Chiavarone said.