Is Macy’s A Buy?

In early 2007, the consumer retail store Macy’s ($M) was trading in the mid-40s. The chart still looked great and there was no major technical sign that the up-trend was going to stop. However, less than a year later, the stock was trading in the low single digits as the nation was in midst of the Great Recession. It actually hit a new all-time low but found support near the old all-time low (the history of the company is actually really old, but this current company went public in late 1992).

However since the all-time low was set in 2008, Macy’s has been on a tremendous run (albeit in a steady pace) as it reached new-all time highs back in May 2013. However, since then, the stock is off about 16%. While that is the smallest pullback of the major pullbacks since the all-time low, it still is a significant one. On top of that, Macy’s is approaching the 20 month Simple Moving-Average (SMA), where Macy’s has “bottomed” many times before. If you look at the chart, you’ll see that in every pullback, Macy’s has gotten near the 20 month SMA and reversed course. One other bullish thing is that Macy’s is reaching former resistance of $42, which might act as support now. Lastly, on the monthly chart, Macy’s is the most “oversold” since late-2009. If you actually zoom into a weekly chart, you’ll see the RSI reading at ~20, which is the lowest since the week of the all-time low (but remember,¬†oversold can become more oversold).

While these in itself are no reasons to buy a stock, together they do provide compelling evidences that Macy’s may find a bottom soon. The one major bearish thing about the chart is that it did not hold above the previous all-time highs. ¬†Secondly, the market has hovered near all-time highs yet this has sold off. This IS a definition of a laggard. So it has that going against it. Thirdly, there are some minor RSI bearish divergences. Finally, while Macy’s is no JC-Penney (at all-time low), it also is no Ross Stores (at all-time high).

The way I will look to play this is to buy a 1/2 position near 42-42.50, and add if I see strength or any other bullish reasons on the daily chart (bullish divergences, relative strength, etc). My target would be new all-time highs (above 51). My stop will be tight as I will not let this trade much against me since it is at a “do or die moment”. Preferably I would want this to hold above 42, but below 41 will be my max pain for my half (initial) position. So to conclude, while I am not in love with the name/stock, I like my chances and risk/reward here.

(Note: No position. I do not take all trades I blog about. Will update on Stocktwits/Twitter if I do enter.)

$M Monthly chart

Macys Monthly

 

 

Tags: $M $XRT $JCP $ROST 

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.

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