Shares of retailer Macy’s, Inc. (NYSE:M) rallied a little more than 10% over the past week-and-a-half off its 52-week lows amid a bid in the retail space and a continuation of the broader market’s stampede. As a result, Macy’s stock has now completed a bullish pattern that I pointed to in late September, which could result in further gains in coming months.
On Sept. 25, I said that Macy’s stock could see fourth-quarter gains as the holiday shopping season nears. While I saw bullish potential for the stock, I wasn’t ready just yet to buy M; first, I wanted to see seller exhaustion confirmed by a bullish reversal day or week.
I further stated that Macy’s would have better support in the mid- to high $40s, which indeed is where the stock last week began to bounce from.
Macy’s Stock Charts
As a result of last week’s bounce, Macy’s stock left behind a so-called “outside candle” or bullish engulfing candle” on the weekly chart that fully engulfed the prior week’s open-to-close range. What’s more, the bullish reversal took place at a major horizontal area of support that stretches back to the year 2007, where this level acted as resistance.
Lastly, the reversal also took place the week after M stock dropped below its red 200-week moving average for the first time since 2007.
While Macy’s has not yet materially surmounted this moving average, last week’s bullish reversal still stands strong — and through a technical lens, this is the pillar against which active investors can play M long for the time being.
On the daily chart, we note that Macy’s stock began to reverse higher on Monday, Oct. 26, just after briefly dipping to a fresh 52-week low. The reversal back higher has since also pushed M back above its yellow 21-day moving average for the first time since July.
The fact that M has not traded above this moving average in about three months just highlights the viciousness of the selloff since late summer.
On Tuesday, Macy’s stock began to pause at a little horizontal area of resistance from October.
Active investors not already long Macy’s stock after last week’s bullish reversal could look to buy any dips in the stock so long the $48 area is not violated on a daily closing basis. Upside into the mid- to high $50s remains into year-end.
For risk management purposes, please note that Macy’s is scheduled to report quarterly earnings next week on Nov. 11.
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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.
