Nordstrom's Big Selloff Friday Is a Huge Buying Opportunity

Shares of Nordstrom are down a whopping 15% Friday on bad earnings news. But comprehensive technical analysis shows this is the biggest buying opportunity in the stock in years.
By Ken Goldberg ,

Nordstrom (JWN) - Get Report stock is burning faster than a packed clothing warehouse Friday after the retailer released a disappointing earnings report. But forget about all of that, because right now this stock is presenting what's probably its best buying opportunity since late 2008.

The weekly bar chart below shows that the 2007, 2011 and 2012 inflection zones about to be seen, as weekly stochastics return to the same oversold levels where selloffs end and rallies begin. What's more, the daily bar chart (which is not shown) reveals that the stock's price is now tickling the lower five-standard-deviation band (which contains 99.99% of normality). This extreme puts our objective decision support engine on red alert for an imminent trading low, as bearish sentiment at these extremes is impossible to maintain for more than a couple days to a couple of weeks. 

Click here to see the following chart in a new window

Therefore, if you are short, stop patting yourself on the back for being the genius that sold-short Nordstrom near $80. Take profits in the low $50's, or at least use buy stops at $54, so you don't lose what you've just been rewarded with. If you're long, this is not the time to sell, as buying actions are indicated here, as per the decision support engine's objective analysis.  

Although the $45 +/-$3 zone can't yet be ruled out, its attainment would only increase the upside potential in the coming six to 12 months. If $52 +/-$2 fails to hold, a couple more down/up stairsteps are likely to test the lower zone just given. However, playing for that decline, here, after shares just fell 38% in six months, wouldn't be wise. 

Longer term, this price decline warns of problems for the economy and the retail sector, as well as the eventual arrival of global recessionary/deflationary forces. But $60 should be seen before $35 breaks, which is the ultimate forecast for the coming 18-24 months, where $22 +/-$3 beckons.

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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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