A rectangle pattern has formed in the chart of Floor & Decor Holdings Inc. (FND).  Depending on which way the stock emerges from this pattern, FND could see a breakout or a breakdown.

FND operates as a specialty retailer in the hard surface flooring market. Its stores offer a range of tile, wood, laminate, and natural stone flooring products, as well as decorative and installation accessories at everyday low prices.

The company thrived during the pandemic even though its business is built around in-store shopping. Its sales were up 31% year over year in its most recent quarter. This growth is attributed to its large and loyal professional customer base. Management plans to increase its store count by 20% per year until it hits 400 locations.

FND had $271 million in cash as of the end of the latest quarter, compared with only $3 million in short-term debt. The company has a current ratio of 1.6 and a return on equity of 18.6%.

The stock has seen its revenue grow 9% over the past year and earnings rise 13.9%. Sales are expected to grow 22.6% this year. FND had a strong 12 months price-wise which has resulted in a trailing P/E of 63.15.

The stock’s performance over the past month has been mixed though, leading to a Momentum Grade of C in our POWR Ratings system.

Take a look at the 1-year chart of FND below with added notations:

  Chart of FND provided by TradingView

Over the past couple of months, FND has rallied up into a sideways trading range and a rectangle pattern has emerged. While in the range, the stock has formed a resistance level at $108 (red), and a level of support at around $90 (green).  At some point, the stock will have to either break the resistance or the support.

A trader could enter a long position if the stock were to breakout above $108. The ideal short opportunity would be on a break below $90.

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Christian Tharp, CMT

@cmtstockcoach

FND shares were unchanged in premarket trading Friday. Year-to-date, FND has gained 10.57%, versus a 4.23% rise in the benchmark S&P 500 index during the same period.

About the Author: christian

Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock. More...

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