How to Adjust Positions in Retailers Dillard’s, Nordstrom, Macy’s

NEW YORK (TheStreet) -- Tepid consumer spending and weaker confidence in the first quarter created share price weakness for mall anchors Dillard's (DDS), Nordstrom (JWN) and Macy's (M).

This downside volatility followed strong technical momentum going into this year, thanks to solid holiday sales during the 2014 holiday season.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

Here is how to read a daily chart: There are two moving averages to follow: the 50-day simple moving average is in blue and the 200-day SMA is in green.

Here is how to read a weekly chart: This chart shows weekly price bars going back to the beginning of 2009 when the bull market for stocks began.

The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week SMA.

The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 0 to 100. A reading below 20 is oversold, and a reading above 80 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.

Here is the daily chart for Dillard's:


Courtesy of MetaStock Xenith

Dillard's closed at $116.56 on Tuesday and has a loss of 6.9% year to date. The stock is 19% below its all-time intraday high of $144.21 set on April 13.

The stock had a price gap below its 200-day SMA of $119.63 on May 15 after an earnings miss the day before. The low on May 15 was $112.30.

Here is the weekly chart for Dillard's:


Courtesy of MetaStock Xenith

The weekly chart for Dillard's is negative with the stock below its key weekly moving average of $123.18, with a projected momentum reading of 28.42, down from 36.01 on May 29. The 200-week SMA is the long-term "reversion to the mean" at $86.44.

Investors looking to buy Dillard's should place a good 'til canceled limit order to purchase the stock if it drops to $115.76, which is a key level on technical charts until the end of this week.

Investors looking to book profits should place a good 'til canceled limit order to sell the stock if it rises to $133.84, which is a key level on technical charts until the end of this month.

On April 9 we indicated that a price gap below $139.90 and $137.82 indicates a potential correction for the stock and this proved to be the case.

Here is the daily chart for Nordstrom:


Courtesy of MetaStock Xenith

Nordstrom closed at $73.55 on Tuesday and has a loss of 7.4% year to date, with the stock 12% below its all-time intraday high of $83.16 set on March 23. The stock moved below its 200-day SMA on May 14 and is now below its 50-day and 200-day SMA of $77.27 and $75.17, respectively.

On April 9, we indicated that if the stock fell below its 50-day SMA, then at $79.75 the downside risk was to the 200-day SMA, then at $73.70.

Here is the weekly chart for Nordstrom:


Courtesy of MetaStock Xenith

The weekly chart for Nordstrom is negative but oversold with the stock below its key weekly moving average of $75.6. The stock's projected momentum reading of 18.50 is below the oversold threshold of 20.

The 200-week SMA is the long-term "reversion to the mean" at $60.30.

Investors looking to buy Nordstrom should place a good 'til canceled limit order to purchase the stock if it drops to $71.93, which is a key level on technical charts until the end of this week.

Investors looking to book profits should place a good 'til canceled limit order to sell the stock if it rises to $79.45, which is a key level on technical charts until the end of this month.

On April 9, we indicated that a price gap below $81.82 and $79.45 and $81.82 indicat the risk of a correction.

Here is the daily chart for Macy's:


Courtesy of MetaStock Xenith

Macy's closed at $68.49 on Tuesday and has a gain of 4.2% year to date, with the stock up 12% above its Feb. 24 low of $61.10. The stock has been above its 200-day SMA since Nov. 6 and is above its 50-day and 200-day SMAs of $66.48 and $63.01, respectively.

Here is the weekly chart for Macy's:


Courtesy of MetaStock Xenith

The weekly chart for Macy's is positive with the stock above its key weekly moving average of $66.92, with a projected momentum reading of 66.10 rising above last week's reading of 62.65. The 200-week SMA is the long-term "reversion to the mean" at $47.46.

Investors looking to buy Macy's should place a good 'til canceled limit order to purchase the stock if it drops to $65.96, which is a key level on technical charts until the end of the week.

Investors looking to book profits should place a good 'til canceled limit order to sell the stock if it rises to $72.64, which is a key level on technical charts until the end of the this month.

 

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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