Macy's Retreats From Heavy Resistance

Last week, Macy's (M) entered a major resistance area. On Friday, the stock left behind a key downside reversal after putting in a seventh straight higher high. This week, Macy's stock has continued to weaken as a healthy pullback develops. For patient investors, the end result will be a very low-risk entry opportunity.

A week after Macy's powerful earnings-inspired breakout move back on Aug. 11, the stock began to fade. By mid September, the stock had filled the huge Aug. 11 gap while remaining in a narrow consolidation pattern just below the 200-day moving average.

Macy's continued to move sideways for all of October as overhead pressure increased. When November opened, it began to lift. As earnings approached, the stock put in a second straight higher monthly low. The stock was setting up well for a positive result.

Macy's opened on Nov. 11 with another earnings-inspired upside gap. Two weeks later, the stock was retesting a major supply zone just below $46. With momentum easing, this key area held, leading to a pullback.

As this phase plays out, patient Macy's investors should keep a close eye on the $41 to $39 area. This two-dollar zone, which includes the August high as well as the Nov. 11 breakout gap, marks a very solid low-risk buy zone. A base here will allow the stock to work off its overbought condition while building a new base.

Click here to see the below chart in a new window.

This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.

More from Stocks

What You Need to Know About Facebook and Europe's New Privacy Rules

What You Need to Know About Facebook and Europe's New Privacy Rules

8 Bold Moves General Motors Could Make to Rev Up Its Battered Stock Price

8 Bold Moves General Motors Could Make to Rev Up Its Battered Stock Price

Is Your Investment Portfolio Prepared for Trade Wars, Inflation and More Trump?

Is Your Investment Portfolio Prepared for Trade Wars, Inflation and More Trump?

GE Is Too Opaque, Too Diversified and Too Poorly Managed: Doug Kass Insider

GE Is Too Opaque, Too Diversified and Too Poorly Managed: Doug Kass Insider

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric