Mall anchor J.C. Penney (JCP) fell below its floor before the open Friday as the stock crashed 23% on a negative reaction to earnings. I do not show nearby value levels, as my buy levels are below $3 a share. The stock traded as low as $3.51 before the open, but opened with a new post-election low of $3.85.
J.C. Penney has been a turnaround story for more than three years, and this negative reaction to earnings pushed the stock into bottom-basement territory, solidly below the important $5 a share threshold.
J.C. Penney closed Thursday at $4.71, which provided an earnings warning. Why? Many brokerage firms do not allow investors to buy stocks trading below $5 on margin, where an investor owns the stock, not fully-paid for. When this happens, the investor must either make up the full purchase amount, or sell the stock. This "margin call" is a negative for the stock and makes it difficult for the stock to climb back above the $5.00 threshold.
At Thursdays close of $4.71, the stock was already down 43.3% year to date, and solidly in bear market territory 56.1% below its post-election high of $10.74 set on Dec. 8. The stock had a gain of 12.9% since its post-election low of $4.17 set on May 15.
J.C. Penney has been below a "death cross" on its daily chart since Nov. 9 when the stock closed at $8.36. A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving average, and indicates that lower prices lie ahead. This bearish signal remains on the chart today.