Nordstrom (JWN - Get Report) stock is heading to the Rack with Wednesday's deep discount. The pun is not all that funny to begin with and certainly isn't humoring the bulls, with shares closing lower by 9.25%, to $34.35, and new 52-week lows in the session.
It's been a tough quarter for many retailers thus far. Lowe's (LOW - Get Report) is under pressure on Wednesday, while Kohl's (KSS - Get Report) was punished on Tuesday. The bright spots include Target (TGT - Get Report) , up 9%+ Wednesday, while TJX Companies (TJX - Get Report) moved cautiously higher on Tuesday.
Earnings of 23 cents per share came up well short of expectations of 42 cents. Revenue of $3.4 billion missed expectations by $200 million and declined 5.5% year-over-year. Management had to reduce its full-year outlook for sales and earnings as a result.
For Nordstrom, its 52-week low of $33.76 is 50% below the stock's 52-week high made -- perhaps surprisingly -- in the fourth quarter of 2018. Shares were down about 15% over the last month, giving investors some comfort that the market may have priced in the company's results. Apparently not.
Trading Nordstrom Stock
After the board thumbed its nose at the Nordstrom family's takeover offer, that $50-a-share bid is starting to look pretty good in hindsight. Maybe the swift decline gets the buyout talks -- which ended about a year ago -- started up again. Perhaps the family will feel they dodged a bullet (despite them owning quite a bit of stock already).
Over the last eight months, this stock has become a complete disaster. Now bouncing off its lows, JWN was probing the $34 level in Wednesday afternoon trade. In 2016, this level was the floor for Nordstrom stock, which threatened to go below it several times, but ultimately closed above this mark on a weekly basis before bottoming and going higher.
Can the same thing happen again? That's what bulls are hoping for. A weekly close below $34 could trigger a retest of the 2016 lows near $32.20. I would not want to stick around on the long side, if JWN stock losses the $34 level.
That said, shares are now oversold according to the relative strength index (RSI), shown via the blue circle on the chart. The stock also pays out a dividend yield of roughly 4.3% and trades at about 10 times this year's new earnings outlook (at the midpoint of management's latest guidance). Plus, M&A talk is always a possibility, however slim that may be. If Nordstrom stock starts to gain some upside momentum, look at $36.50 and $38 as two levels it needs to reclaim.
Above these levels can fuel a run to the backside of prior channel support now near $42. For that to happen, though, Nordstrom stock will have to push through the 10-week moving average, something it has struggled to do all year. While the situation is unattractive, it's hard to be a short-seller with the stock down 50% from its highs. Let's see how it closes the week.