Department store retailer JCPenney’s (NYSE:JCP) fall from grace in recent years has been well-documented. The analyst community’s feisty opinions on both sides of the stock are almost Apple-esque (NASDAQ:AAPL) — a testament to how broad an audience is following this story.
The longer-term chart shows the stock’s dramatic 85% fall from the 2007 highs to the 2009 lows. Ever since the 2009 lows, the stock has more or less tread water, but also has traded in a huge range between $14 on the lower end and $44 on the upper end.
Even though the stock has rallied around 20% off its November lows, it remains lower by nearly 45% on the year. As a result, on the longer-term chart above, the recent pop doesn’t have much significance.
However, since the 2009 bottom, the stock has displayed a good history of retracing to the important 50% and 61.80% Fibonacci retracement levels of a swing before ultimately heading lower again.
If we take the swing from the February highs to the July lows, for example, note that by Sept. 19, JCP had retraced somewhere between 50% and 61.80% of said swing, at which point it again continued to move lower.
The current bounce off the November lows might well seem a bit much in just three weeks. Indeed, momentum oscillators are moving higher and the stock might need a little breather before continuing higher. However, so far, JCP has only retraced its latest swing (October highs to November lows) by not quite 38.2%. Given the stock’s history of retracing to the 50% or 61.80% levels, it might well have upside to around $21.30 or $22.70, respectively.
Whether the stock ultimately will fail lower again, I don’t know, nor is it my focus in the near-term. For now, I am looking for the stock to run into a better resistance area, which I currently see to be between 10% and 18% higher from where the stock closed on Tuesday.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.