Department store operator J C Penney Company Inc (JCP) — whose shares have been on a fairly bumpy ride again this year — is scheduled to report its third-quarter results Wednesday after the close of trading. And with earnings coming up and JCP stock trading at a critical technical juncture, it’s prime time to map out a battle plan for JCPenney once earnings are out.
After all, JCP stock is known to make some big post-earnings moves.
Specifically, JCPenney is expected to report a loss of 79 cents per share, which actually would be an improvement over the year-ago period. Estimates for revenues also are better, at around $2.80 billion.
To be sure, it is a big earnings week for retailers in general, Macy’s (M), Kohl’s (KSS) and Nordstrom (JWN) are also scheduled to report this week. Furthermore, with retailers pushing holiday specials farther and farther up the calendar, analysts are hoping to get any guidance they can on the holiday shopping season and the rest of the year.
While JCP stock will to some extent be correlated to the rest of the retailers, JCP remains a single-stock story with much focus still on a turnaround of the once vibrant company.
JCP Stock Charts
A quick look at the multiyear weekly chart of JCP stock says it all. After topping out in early 2007 in the mid-$80s, the stock began to slide and found a low in early 2009, where it began to rally along with the broader market.
Unlike the broader market, however, JCP topped out in early 2012, marking a crucial lower high vs. its 2007 highs, and resumed the slide. In September 2013, JCPenney shares broke below their 2009 lows as well as below their 2001 lows (black horizontal line), and the stock remains struggling to overcome this line to this date. The bulls will like to see JCP stock get back above this line, around the $10 mark, with conviction, possibly after earnings. This would put the stock in a better medium-term position.
On the daily chart, note that in September and October, JCP stock fell sharply and has since formed a support line that stretches back to the early 2014 lows. The price action over the past few weeks has again tightened the stock’s trading range and formed a wedge of sorts.
It is highly likely that JCPenney will see a resolution out of this wedge after Wednesday’s earnings report.
On a daily close back above the $8 area, active traders and investors could look to buy the stock for a move into the $10 area. On a break below the $7 on a daily closing basis, the stock could revisit the $5.50 area, though selling short a stock below $10 can often be tricky.
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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.
