Trade of the Day: Watch Out for Pending Death Cross on JCP’s Chart

J C Penney Company Inc (JCP) — This struggling department store retailer has been attempting to stage a turnaround under CEO Mike Ullman, who returned in 2013 to fix the botched attempt by former CEO Ron Johnson. His focus has been on heavy promotional events and bringing back and expanding in-house brands.

Shares fell in after-hours trading Wednesday, following the release of the company’s fiscal third-quarter results after the close. Losses narrowed to $0.77 a share, beating Zacks consensus estimate for a loss of $0.83. However, the top line came up short, with revenue falling 0.5% from a year ago to $2.76 billion, missing forecasts for $2.82 billion. Same-store sales were flat for the quarter.

Management forecast same-store sales will increase 2% to 4% in the holiday shopping quarter and gross margins will rise 5% to 6%. But the retailer’s struggles are likely to continue, and its future is in doubt. We can expect analysts to adjust earnings and revenue guidance lower for the full fiscal year.

Despite positive internal readings on momentum and MACD, the price action is weak. If JCP stock cannot hold above $7, look for a continuation of the decline that began in September. A break below $7 would likely result in a test of the February low under $5 and a death cross. This negative long-term indicator is triggered when the 200-day moving average crosses above the 50-day.

The stock’s failure to complete a successful consolidation here would renew the long-term downtrend that began in early 2012.

JCP Stock Chart
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