Macy’s, Inc. (NYSE:M) shares have spent the better part of the past month further consolidating a sharp rally off the December lows. While the stock is fairly dead money until a next leg in either direction takes place, this is a good spot to to evaluate what the charts are trying to tell us about the next move in Macy’s stock.
What’s nice is that it’s likely to be to the upside.
As one of my former managing directors at JPMorgan used to say, “You can learn a lot by just watching the markets.” What he meant is that we don’t always need to be furiously trading, and that watching from the sidelines can give us much-needed perspective without dealing with the emotions of being in a trade.
One simple observation I have about Macy’s stock right now is that as much as another leg lower might be in the cards, we should respect the absence of selling pressure in recent weeks.
Moreover, until we see some confirmed selling pressure, the path of least resistance may be higher. (I would humbly submit that this analogy also applies to the broader stock market.)
When I last discussed the state of Macy’s stock on Jan. 12, I said, “Active investors may look to buy Macy’s stock for more mean-reversion higher into the low to mid-$40s.” Since then, M shares have done just that, reaching my mid-$40s price target in early March.
Macy’s Stock Charts
Looking at the multi-year weekly chart of Macy’s, we see that after a lousy year in 2015, the stock’s bounce off the late-December lows has served as some much-needed mean-reversion. But the bulls also would point out that through a purely technical lens, Macy’s stock may want to retest the underbelly of its broken 2009 uptrend line, which currently sits in the low $50s, or about 16% higher from Thursday’s close.
On the daily chart, we see that after M stock pierced back above its yellow 50-day simple moving average in mid-January, it retested said line in mid-February and began pushing higher again. This was an important and good technical development and now puts some credence on this moving average, which should be watched as a potential area of support if and when some selling pressure should come about.
Since early March, M stock has mostly been trading in a tight range between $43 and $45.
Active investors and traders could thus look to buy Macy’s stock upon a break and daily close above the $45 area.
Any break below the yellow 50-day MA may be a signal of another leg lower in the stock.
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