The broader stock market continues to feel heavy, and despite Thursday’s afternoon turnaround, the path of least resistance likely remains lower. However, some individual stocks are reaching technical areas where both trades and more structural investments are becoming interesting.
Macy’s, Inc. (NYSE:M) stock, which has fallen 30% since mid-July more or less in a straight line and has now reached an intriguing technical juncture, is one such stock.
Given the still shaky stock market, I continue to advocate focusing on the indices such as the S&P 500 and playing them on the short side upon oversold bounces or breaks of next support levels. But this first better market correction (or mean-reversion move) is increasingly highlighting some stocks and even sectors as eventual buying opportunities.
With the holiday shopping season just around the corner, the anticipation of which tends to favor some retailers, shares of Macy’s could also soon begin to bottom out and see more constructive price action for the bulls again.
The broader stock market decline since August has weighed on some stocks more than on others. One group of stocks that underperformed the market at least as of this past summer is the department store operators.
While part of the decline in these retail stocks may be attributed to structural issues relating to online competition from the likes of Amazon.com, Inc. (NASDAQ:AMZN), particularly around the Christmas holiday season a good many consumers still like to stroll the malls and undertake some shopping the old fashioned way, which may help shares of department store operators like Macy’s bounce back in the fourth quarter.
M Stock Charts
Looking at the multiyear weekly chart of M stock, we see that the 30% drop since mid-summer has brought it back to its 2009 support line and leaves most of its momentum oscillators in oversold readings last seen during the financial crisis.
In many ways, the recent correction in Macy’s stock has simply retraced it back closer to its previous horizontal area of resistance (blue bar) which it broke above in 2013. Often times such major areas of resistance ultimately get retested. The blue bar is still below current prices (i.e., closer to the mid-$40s) and still acts as an area of attraction, which is to say that an overshooting selloff toward the mid- to high $40s cannot be ruled out for now.
Looking at the daily chart of M stock, however, we see that the drop since July has been relentlessly steep and that Macy’s shares have traded below their yellow 21-day moving average for nearly two months now.
That’s quite a feat.
With oversold readings from momentum oscillators like the MACD (bottom of chart) at historic levels, M stock may soon begin to slow its decline and become a tradable candidate for a holiday-shopping rally.
Active investors could look to buy Macy’s stock at the latest upon a bullish reversal on a weekly closing basis for a move that could see M catapult back into the high $50s.
Like what you see? Sign up for our daily Beat the Bell e-letter and get investment advice delivered to your inbox every morning!
Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.
