Attention Macy’s Buyers: Shares May Hit Resistance Soon

Macy's continues to churn higher but the stock may finally be running into resistance. Here's a look at the charts.
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Macy’s  (M) - Get Report shares jumped higher early Wednesday but have since pared their gains to just 1.5%.

The moves came after an update from the company. Macy’s said its November and December comp-store sales slid just 0.7% for company-owned stores and 0.6% overall, much better than analysts had expected.

Further, Macy’s also announced it may cut more jobs and said it will close 28 stores (and one Bloomingdale’s location).

Perhaps to some investors’ surprise, the stock has been rallying over the past few months. In fact, the stock actually bottomed in August and with Wednesday’s rally shares are at a five-month high.

It makes Macy’s a worthy pick for Real Money’s Stock of the Day and comes a day after the team took a deeper look at Kohl’s  (KSS) - Get Report.

Kohl’s is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells KSS? Learn more now.

Trading Macy’s Stock

Daily chart of Macy's stock.

Daily chart of Macy's stock.

Let’s give credit where credit is due: Macy’s stock has done a good job avoiding new lows. On top of that, it’s put in a series of higher lows through the past five months and has continued to churn higher. Shares are now up more than 32% from the 2019 lows. 

That said, Macy's business remains under pressure, as does the entire department store industry. Worse, shares may be running headfirst into a tough level of resistance.

Macy’s explosive move over $17 is encouraging for the bulls. However, with Wednesday’s rally, the stock officially filled its August gap while running into the declining 200-week moving average.

Is that the end for the bulls? No, not exactly. But they need to be careful going forward. From here, they have one of two choices. 

Either power ahead through this area of resistance or pull back. If it’s the former and shares continue higher, see that Macy’s stock closes over the 200-day moving average. Above it puts $19 on the table, as well as the 50% retracement at $19.14. Over the latter mark and the stock can gain momentum.

All hope is not lost on a pullback, as Macy’s stock has the $17 level, as well as the rising 20-day moving average and uptrend support (blue line) near $16.50. If these marks hold, bulls are still control. Below these marks and the 50-day moving average could buoy the name, although it would mean the stock has certainly lost some steam. 

So what’s the bottom line? Bulls are in control of Macy’s stock right now, but not with overwhelming conviction. Longs should use caution near current levels as odds favor resistance. However, there’s no reason to turn outright bearish at the moment.