Shares of Macy's (M) - Get Report are surging this morning after the company topped analysts' expectations with its latest earnings report. The stock is up more than 4.5% on the news and is powering through heavy resistance in the process. Volume is jumping as an eight-week trend of below-average trade comes to an end.
For investors, this is a very positive move that will carry shares higher in the near term.
Macy's entered a severe bear market in the middle of last July. By start of November, the stock had fallen over 30%. Shares showed some signs of stabilization ahead of the company's Nov. 11 earnings report, but disappointing earnings results for the third quarter lead to a massive breakdown gap. After dropping 14% on the news, Macy's began a final leg lower. The stock put in another lower monthly low in December, its sixth straight one, as the bear market extended to a 54% loss. Finally, as the final month of 2015 came to a close, Macy's began to gain its footing.
This year began with a successful retest of the 2015 low. Since bouncing off the $34 area, Macy's has been steadily improving. The stock now has a higher high in place for February and, with the help of today's impressive breakout, has left behind layers of support. This recent action has set the stock up well for a continued rally.
In the near term, investors should consider the $42-to-$41 area as a low-risk buy zone. This area includes the stock's January and initial February highs. A close below this week's low of $40.35 would be a clear warning sign that a maintainable recovery is on hold.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long Macy's.