Macy's Is at a Death Cross

Low with upside ahead of Thursday report.
By Richard Suttmeier ,

Iconic retailer Macy's (M) - Get Reportturned on a dime in July 2015, when evidence surfaced that online retail giant Amazon (AMZN) - Get Report was taking significant sales from such mall anchors. Fast-paced consumers realized they could buy almost anything they wanted on the Internet rather than drive to the mall and wind up paying more for the inconvenience.

Talk about share-price volatility, Macy's set its all-time intraday high of $73.61 in July 2015 and got crushed by 71.7% to a post-election low of $20.85 set on July 11. The stock closed Tuesday at $23.52, down 34.3% year to date and deep in bear market territory 48.2% below its post-election high of $45.41 set on Nov. 25. The stock has recovered 12.8% since setting its post-election low of $20.85 on July 11, and the weekly chart suggests that additional upside lies ahead.

It was trading at $23.52 in the morning session.

Macy's reports earnings before the open Thursday and analysts expect the retail giant to earn 44 cents a share. Credit Suisse warns the retail landscape remains risky. They look for some improvements to store sales sequentially, but should be down 8% year over year. Deutsche Bank likes Macy's turnaround story including 68 store closures and 10,000 job cuts.

While Amazon may continue to gobble up Thanksgiving sales this year, the weekly chart for Amazon may end this week negative; the weekly chart for Macy's shifts to positive. This could be a sign of a short-squeeze as hedge funds long Amazon and short Macy's reverse positions.

The daily chart shows that Macy's has been under a "death cross" since Feb. 3 when the stock closed at $32.69. A "death cross" occurs when the 50-day simple moving average crosses below the 200-day simple moving average, indicating that lower prices lie ahead. This tracked Macy's to its post-election low of $20.85 on July 11.

The Weekly Chart for Macy's

Courtesy of MetaStock Xenith

The weekly chart for Macy's ($23.52 on Aug. 8) will be positive if the stock closes this week above its five-week modified moving average (in red) at $23.54. The stock has been below its 200-week simple moving average (in green) since the week of Nov. 6, 2015, when this average was $50.83. This "reversion to the mean" is now at $47.87. The 12x3x3 weekly slow stochastic reading is projected to rise to 36.89 this week up from 27.18 on Aug. 4.

Investment strategy: Buy weakness to the 50-day simple moving average of $22.90. Sell strength to the 200-day simple moving average of $30.33. My monthly value level lags at $13.73 with a weekly pivot of $23.38 and annual risky level of $43.81.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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