Macy’s Inc.: M Stock Isn’t Stopping Yet

Advertisement

Macy’s Inc. (NYSE:M) made a bullish statement on Thursday, as M stock rallied meaningfully following the company’s latest earnings report. Also spurring the move in Macy’s was an announcement that Macy’s will close 100 stores.

Beat the Bell: Macy's Inc. (NYSE:M)Cost cuts have been a significant driver of single-stock rallies in recent years, and Macy’s is no exception. Thursday’s rally in M stock was plenty bullish from a chart perspective, and sets up further gains in coming weeks or months.

In its second quarter, Macy’s Inc. earned 54 cents per share on sales of $5.866 billion, which beat expectations for 48 cents on $5.767 billion. Macy’s then announced it will shut 15% of its stores and cut jobs to trim costs. Moreover, Macy’s said it will focus more on its own branded products and look to invest in stores with the best growth potential.

Let’s move on to the charts.

M Stock Charts

Starting off with the multiyear picture, we see that M stock steadily and orderly moved higher out of the financial crisis. But by 2014 and into summer 2015, it increasingly separated itself from the multiyear black diagonal support line. As August 2015 came around, Macy’s shares began to violently turn lower. This selling period didn’t pause much until this past May.

The May lows coincided with a 61.8% Fibonacci retracement of the entire rally from the late 2008 lows up to the 2015 highs. From this perspective, I can’t speak to a new major bull leg higher in M stock. I also can’t speak to any projections that Macy’s will rally to new all-time highs soon. But as we will see on the daily chart below, in the near- to intermediate-term active investors and traders now have well-defined parameters, and that’s good for risk management and setting up trades.

M stock chart weekly
Click to Enlarge

On the daily chart that stretches back into 2015, we see that while the downtrend in M stock continued in 2016, the rate of change of the selling notably slowed down. In fact, since the stock fell to new multiyear lows in mid-May, shares have stopped making new lower lows and in fact persistently held the $30 area as support. Thursday’s explosive post-earnings rally measured 17%, and in a breakaway gap move, pushed M stock right past the black diagonal resistance line and its red 200 day simple moving average.

M stock daily chart
Click to Enlarge

While M stock may need to consolidate a little in the immediate term, Thursday’s bullish post-earnings price action says the path of least resistance is higher.

Your next upside target is the low to mid-$40s over the next couple of months.

Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning! Download Serge’s Free Special Report: 6 Keys for Successful Trading and Investing.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/08/m-stock-macys-inc-closing/.

©2024 InvestorPlace Media, LLC