How to Trade Macy's as It Faces Key Level After Earnings

Macy's rallied as much as 11% after better-than-expected second-quarter earnings and revenue. Let's have a look at the chart.
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Macy’s  (M) - Get Report opened higher by more than 6% and rallied as much as 11% in early trading after better-than-expected earnings and revenue in the retailer’s fiscal second quarter.

Whether it’s been retailers like Dick’s Sporting Goods  (DKS) - Get Report, home-improvement names like Home Depot  (HD) - Get Report and Lowe’s  (LOW) - Get Report, or big box retailers like Target  (TGT) - Get Report, the retail sector has actually reported pretty solid results this quarter.

However, department stores have been among the hardest hit. Many were closed during the coronavirus lockdown and had been struggling for years leading up to that volatile economic stretch.

Macy's still lost 81 cents a share, but that was ahead of expectations by 99 cents. Revenue of $3.56 billion sank almost 36% year over year, but topped estimates by $50 million.

While shares had a strong open, sellers have stepped in on this one, driving it down to flat at one point. Let’s take a closer look at Macy’s stock.

Trading Macy’s Stock

Daily chart of Macy's stock.

Daily chart of Macy's stock.

The stock has struggled badly with the $7.50 area, being rejected by it now three separate times in the past month. With the 23.6% retracement at $7.55, many traders consider this mark as resistance.

For the bulls, this is not conducive price action. However, if Macy’s stock can reverse higher, they will quickly have their eyes set on the upside.

Specifically, that may be on the 38.2% retracement at $9.52. A move toward that area will also have investors watching the 200-day moving average and the June high at $10.46.

While the price action thus far is not very constructive, there can be downside developments that are positive as well. For example, a pullback that finds support at the 20-day and 50-day moving averages would be solid price action for the bulls. It would allow another higher low to form and put a retest of the 23.6% retracement back in play.

You know what they say, the more times a level is tested, the more likely it is to give way. 

However, bulls run into trouble should support not come into play near $6.50. Below the August 21st low at $6.20 puts last month’s low in play at $5.82. That puts a monthly rotation lower on the table and also puts Macy’s stock below $6 support.

That opens the door to the $4.75 to $5 zone, which was support from March through May. 

In a nutshell, we need to see $6.50 hold on the downside and on the upside, bulls need Macy's to take out its post-earnings high near $7.79.