Given the unprecedented rate hikes by the Fed over the past year, you wouldn't expect housing stocks to be among the leading groups. Yet, we've had a number of swing trading successes this year in that sector. In a related play, FND stock became one of the latest winners.
Another Building Sector Leader Emerges
Floor & Decor is a retail stock with ties to the housing sector. The seller of flooring and related accessories for homes is among the top holdings in both the SPDR S&P Homebuilders ETF and the iShares U.S. Home Construction ETF.
With FND stock, the latest consolidation saw a sharp drop on earnings back in May (1). It put the stock below its 50-day moving average line for a few weeks but really didn't see much more selling.
When it popped back above its 50-day line (2), it was a good sign of recovery from the gap down. We wanted to see if it would hold up and it did with support along both its 21- and 50-day lines.
After a couple of weeks, it joined SwingTrader as it looked to clear the latest area of resistance (3). Volume confirmed the institutional interest in FND stock but the price action was a little disappointing by the close. Sure, it was still a 2.5% gain for the day but well off its highs and closing midrange.
Handling FND Stock
The disappointment continued the following day as FND stock fell a little lower (4). But it closed in the top of the range on an inside day with continued support at its 21-day line.
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Our patience paid off as FND stock popped higher the next day, giving us the opportunity to lock in a third of the position with a nice gain (5). The next day saw a downside reversal as a strong gain faded by the close (6). But having locked in some gains already gave us the ability to give the stock a little room.
Though it went down further, it never punctured its short-term 5-day moving average and was right back at highs just a few day later (7).
A rise in the CBOE 10-Year Treasury Yield had its effect on stocks starting on Wednesday, but FND stock still held above its 5-day line and so we held (8). But when the ADP data came out and spurred the treasury yields even higher, we took our chance to exit the remaining position of FND stock to retain our gains (9). It wasn't because of the data itself or the yields per se, but the fact that FND stock fell below both its 5- and 10-day moving average lines. The reaction to news is more important than the news itself.
FND stock may not be done. It seems to be getting support at 100 and may be setting up for another swing trading chance.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
