Closeout retailer Big Lots (BIG) gave Wall Street a good earnings report last Friday, with Q1 results that beat on the bottom line while matching up top. Big Lots also upped its outlook for the full year, all of which led to a (ahem) big rally in BIG stock that also had positive implications on the charts.
The final figure for Big Lots earnings was 50 cents, which although lower by about 18% year-over-year, did beat estimates by 6 cents. Revenues of $1.26 billion were up a little more than 1% YOY and matched estimates.
More importantly, Big Lots raised its outlook for the full year to a range of $2.35 to $2.50 per share, which compares favorably to the previous guidance range of $2.25 to $2.45.
The result? A whopping 13% rally for BIG stock, which came on a sizable surge in volume.
BIG Stock Charts
Bigger-picture, on the below weekly multiyear chart, note how BIG stock held its 61.80% Fibonacci retracement support line off the 2009 lows up to the early 2012 highs. In other words, the February lows in the stock coincided with an important support line, which continues to support Big Lots’ medium-term outlook.
Furthermore, the February V-shaped bottom was a good statement by the bulls that BIG stock belongs higher, not lower. Last Friday’s rally in the stock was another call for and by the bulls, which now stands a good chance of pushing shares back toward their March 2012 highs.
On the daily chart, last Friday’s rally finally cleanly moved BIG stock past lateral resistance between $39 and $40. The move also filled a down-gap from August 2010 and moved BIG stock into the next higher down-gap from April 2012 (blue box). The aforementioned V-shaped reversal from earlier this year is also better visible on the daily chart. Note the up-gap in March, which took the stock back above its 100- and 200-day simple moving averages (blue and red, respectively).
From a 12-month point of view, Friday’s up-gap has broken BIG stock out of a big basing period and now looks to have enough momentum to push it back toward the 2012 highs (the $47-$48 range) in coming months. A first upside target, however, is the $46 area, which would will the aforementioned April 2012 down-gap.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
