J.C. Penney (JCP) shares rallied Friday after the retailer reported quarterly results. The gains aren't likely to last, however, and investors can use stock options to profit from a short-term decline in the stock.
The company's adjusted loss per share, of 21 cents, was in line with the Wall Street consensus. Elsewhere, though, the quarterly report surprised, and not in a good way. Net sales of $2.85 billion missed the analysts' consensus of $2.95 billion, according to CNBC. Comparable-store sales declined even though analysts had expected them to increase.
The report comes on the heels of largely negative and worsening fundamentals for J.C. Penney. The company has not paid a dividend for several years. Revenue has been rougly flat for the last four years and has declined significantly over the last 10. The company has reported a net loss for the past five fiscal years.
The current chart reveals a puzzling level of optimism, perhaps because the company's bottom line met expectations in the latest quarter after J.C. Penney had missed estimates in several quarters.
The chart also reveals three reasons that price is likely to move lower again in the short term. The bearish channel established mid-September defines a falling trading range between the middle and lower Bollinger Bands. The stock made a strong bullish gap on Thursday, the day before the quarterly report.