Ailing retailer JC Penney Company Inc (NYSE:JCP) finally gave JCP stock owners something to cheer about during last night’s earnings report. If they have the strength to cheer after such a persistent and prolonged beating, that is.
JCPenney reported its same-store sales doubled the Street’s estimates, rising 1.7%. However, the company still lost money. Just not as much as investors expected.
JCP stock is currently up 18% in early morning trading. The million dollar question is whether the good news is worth buying, or whether today’s price jump should be viewed as the final throes of a dying retailer.
I suggest letting the JCPenney chart be your guide.
JCP Stock Charts Remain Shaky
While an overnight 18% pole-vault may sound like a victory worth celebrating, for a stock like JCP, which was down 67% year-to-date heading into earnings, it’s barely a blip on the radar.
As a self-professed charting addict, I suggest playing a game I like to call “noise or noteworthy.” To avoid making a mountain out of a molehill, let’s see whether today changed the technical posture of JCP stock’s death spiral.
Is this a noteworthy move worth changing our outlook on the stock? Or, is it merely noise?
Thus far, the rally has carried JCP stock above its 20-day moving average. But it hasn’t broken any prior resistance levels, and it remains below the 50-day and 200-day moving averages, which loom heavy overhead.
Furthermore, the previous descent created a lower pivot low on increasing momentum, showing that the downtrend is still very much intact. Had today’s jump been preceded by slowing momentum, then perhaps we could make a stronger case for a positive outlook on JCP stock, but as-is, we can’t.
This doesn’t mean JCPenney can’t eventually bottom, but one robust up-day isn’t enough to attract bottom fishers to the pond. If you’re one such pole-bearing bargain hunter, then I suggest patience before deploying your hard-earned dough into this stock.
At a minimum, we need to see JCP shares rise back above the 50-day moving average at $3.50. The formation of a bottoming pattern like a double bottom or inverse head-and-shoulders would be a welcome development as well.
Until then, I’d consider this rally a fade.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.