Should Bill Ackman Buy Back Into JCPenney?

JCPenney has been one of the worst stocks over the past few years. At the same time, it’s also been one of the stocks that’s been in the headlines often, and usually not for the best reasons. As you might know, Bill Ackman tried to ‘bottom pick’ JCPenny for awhile, until he capitulated and sold his entire stake a few months ago. That liquidation actually saved him some money, as JCPenney sold off even more after that.

However, since it bottomed in October, JCP is up about 60%. Now it may seem like chasing here, but in reality, it is not. JCPenney might have another 25-35% of upside left.

The Chart

Below is a ~1-year daily chart of JCPenney ($JCP). You can see the intense selling and downtrend until October. Since then, JCPenney has been in a steady climb. There are a few things I like about this chart.

One thing is, the next area of resistance isn’t until about $12.50-13.50 (give or take 50 cents based on how fast it gets there). Not that it’s guaranteed to get there, but I’ve found that stocks like to test previous support a lot. The little red box is the area I will be watching (previous support, downtrend line, 200 day) for resistance.

Second, there is a “vacuum” between $10 and $12.50. As you can see on the left, not a lot of volume was done as these prices. Thirdly, I like the bounce off the 50 day SMA and the bullish cross by the 20 day (over the 50 day). Lastly, while the volume hasn’t been great, it is more constructive as of late.

Now, should Ackman buy back into this by buying back 18% of the company (39 million shares)? No. But should Ackman try buying ~500,000 shares for a quick scalp? Sure.  And if the trade starts working, he should just use a trailing stop and hit out for a flat if it turns again.

JCP Daily

 

(Yes, I’m mostly being sarcastic with the Ackman buying-back into JCP for a ‘quick scalp’ play. Though, he can try!)

(Disclose: Long $JCP)

Tags: $JCP $XRT $M $ROST $RTH 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Jerry Khachoyan Blog