Shares of department store operator J C Penney Company Inc (NYSE:JCP) continue to show relative strength versus the broader market. That’s good. JCP also is showing absolute price action that speaks to even more gains through a six-month lens.
When I last shared a trade idea on JCP stock on June 24, I highlighted the strength of the overall retail sector on a year-to-date basis and pointed to recent bullish price action in JCPenney that looked to usher in better upside momentum still. The stock has endured a little choppiness since, mostly as a reflection of what the broader market did, but in the bigger sense, JCP stock still looks very well-positioned to push higher.
On the news side, things have been fairly quiet for JCPenney; earnings scheduled for mid-August are the likeliest next catalyst for shares.
However, JCP stock did receive an upgrade from Zacks Investment Research, to “strong buy,” with noting some promising changes that the incoming CEO has been and continues to implement, including a focus on higher margin products.
JCP Stock Charts
To start off, let’s first look at a ratio chart of JCP stock versus the SPDR S&P 500 ETF (NYSEARCA:SPY), which clearly shows the relative strength of the stock since late 2014. While this relative strength has been range-bound since April when JCPenney reached its year-to-date highs, the trend and pressure remains higher.
Moving on to the price charts of JCP stock, the long-term picture remains as contrarian bullish as it was a few weeks ago. The stock is still trading below 2001 lows, and given the consolidation phase below below this area (black horizontal) for the past 18 months — which also has seen positive divergence between momentum and price (higher lows in momentum) — the path of least resistance still looks higher.
The diagonal line of resistance from the 2007 top also still serves as a good reference point, but this is a bigger-picture reference area, not something to build specific trades around.
On the daily chart, we see that a series of higher lows since December 2014 has been pushing against the diagonal line of resistance from last September, which on July 7 succeeded to break higher. Also note that the 100-day simple moving average (blue line) has been holding as good support since March, which is to say that a significant break thereof would be a good sign that the near-term upside momentum has faded.
From a risk management perspective, considering that JCP stock in percentage terms is still a pretty volatile mover, active investors and traders would be wise to use smaller-size trades but wider stops and targets so as not to get stopped out on any less-than-significant moves.
Active investors and traders can still look to buy JCPenney around the $9 mark for a move into the $10 area and a stop-loss near $8.40.
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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.
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