Dick's Sporting Goods scores an upgrade

The specialty retailer's operating margins are also expected to rebound in 2010, Merrill notes, thanks to smart inventory management and the conversion to self-service footwear departments. Additionally, the market-share picture looks brighter, due in part to the closure of Joe's Sporting Goods, a chain in the Pacific Northwest.

With Walmart (WMT) chipping away at other specialty retailers of books, video games, etc., Dick's still has a foothold in the sporting-goods arena, as it carries certain brands (The North Face, Under Armour, Callaway) that are not available at the discount giant.

Technically speaking, Thursday's rally in the shares has lifted the stock back above its ascending 20-week moving average. The shares have been advancing slowly for the past 10 months, gaining more than 120% from its March low, but have been consolidating between the 20 and 25 levels since August, despite a continued run higher in the broader market. Maybe the breakout will prove to be the beginning of a new stage of the stock's uptrend.

Beth works for The Options News Network (www.ONN.tv), which provides daily stock and options commentary. The above comments are not intended as trading advice.