Macy's Shares Are Getting Mauled -- Here's What Could Happen Next

Macy's and Kohl's are battling it out for the biggest loser spot on the S&P 500.
By Gary Morrow ,

Macy's (M) - Get Report is under heavy pressure again this morning. The stock's 8% loss makes it the S&P 500's weakest performer after opening the session with a post-earnings downside gap. This is the second straight nasty post-earnings selloff for the stock. Is a fresh down leg ahead, or can Macy's limit further damage by holding on to major support?

A few days after Macy's massive May 11 post-earnings breakdown, which knocked shares down more than 17%, the stock began to consolidate. Macy's made a lower monthly low in June and a slightly lower one again in July, but it was clear the initial downside momentum had eased. This allowed the stock to remain in a very narrow range as it built a solid support zone. This key area is getting a stern test today. If it can hold, patient investors could be rewarded with a low-risk entry opportunity.

As Thursday's selloff develops, M bulls should keep a close eye on the $20.00 to $21.00 area. This key support area includes the June and July lows. With a nicely divergent MACD (moving average convergence/divergence) pattern forming, a hold in this zone would be very encouraging. If the stock can finish out the week without much further damage from current levels, a very low-risk buying opportunity will be at hand. On the downside, a close below $19.00 would leave a massive wall of overhead supply behind that could keep pressure on shares for quite a while.

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