by Serge Berger | May 19, 2014 7:55 am
Fashion retailer Nordstrom (JWN) reported better-than-expected quarterly results last Thursday, sending JWN stock soaring to fresh all-time highs and setting up a trade for the bull crowd.
Last Thursday after the close of trading, Nordstrom announced Q1 earnings of 72 cents per share of JWN stock, beating Wall Street’s consensus by 4 cents. That came on revenues of $2.92 billion, which also beat the Street and (importantly) were 6% higher year-over-year.
The current environment for retailers is considered to be difficult, considering that consumers still are recovering from the financial crisis and competition from online retailers is increasingly stiffening. Nordstrom, however, seems to be doing something right, considering it managed to attract more shoppers to its high-end stores.
On Friday morning, Credit Suisse came out with a positive note on JWN stock, upgrading it from “neutral” to “outperform” with a price target of $78.
The final tally Friday was a push higher of nearly 15% for JWN stock, which gapped higher right out of the gate and never looked back, closing at the absolute highs. Such strong moves to new all-time highs often see follow-through buying in the days or weeks to come, but as usual, it is important for traders and investors to clearly determine their time frame before making a play in the stock.
On the below weekly chart of JWN stock stretching back to 2007, note the band of resistance (blue box) that has plagued the bulls for a long time. After sidling mostly sideways in the second half of 2013 up to last week in 2014, Nordstrom stock had coiled up with enough energy to blast higher last Friday, marking the weekly chart with a powerful green breakout bar.
On the daily chart, the breakout and breakaway gap from last Friday is even more clearly visible. As one would expect, the rally also came on a massive spike in volume, which further confirms that this breakout might be for real.
From here, while many momentum indicators point to immediate-term overbought readings, quicker traders could try to play JWN stock higher for another couple of percent if Nordstrom manages to break last Friday’s highs. However, this isn’t a suitable strategy for most investors given the short time frame.
More often than not, a stock showing the breakout pattern that JWN has tends to settle into a constructive consolidation pattern in coming weeks, which eventually will have built enough of a higher base that the stock can again move higher. In the case of JWN stock, once some consolidation is accomplished, shares could easily move into the high $70s.
But in the short term, leave the chasing to the traders.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
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