Some market indicators really don’t need much explanation to understand their logical deductions. One example is the dreaded death cross, a pattern that department store icon Macy’s (NYSE:M) is about to print. Ordinarily, such a glaring warning sign should convince investors to run. To be sure, the retailer is problematic. Still, options traders seem to be taking the contrarian route with Macy’s stock.

Before we dive into the juicy details, let’s set the framework. The death cross simply describes the condition when a longer-term moving average slips below a short-term average. Typically, the most commonly viewed gauges are the 50-day and 200-day moving averages. So, when the latter tucks below the former, it indicates a gradual erosion of investor sentiment.

However, the market represents the ebb and flow of human emotions. When a well-established investment like Macy’s stock plunges, some market participants will be tempted to buy back in. This bounce-back potential occasionally makes the death cross a contrarian indicator.

It’s very similar to when a company is kicked out of the Dow Jones Industrial Average. Recent historical data suggests that getting booted can often lead to stronger performances. With the weight of pressure removed, the nothing-to-lose attitude can buoy sentiment. A similar dynamic could help boost Macy’s stock.

Options Traders are Betting on M Stock

In any other circumstance, chasing an entity like Macy’s stock would be an imprudent idea. Nowadays, people prefer to shop online. Going to the mall, while not an anachronistic endeavor, is certainly a bit out of touch with contemporary sensibilities. It’s really not surprising that the department store giant is poised to print a death cross in its charts.

However, the smart money seems to be taking the opposite wager. Specifically, Barchart’s options flow screener – which filters exclusively for big block transactions likely placed by institutional or professional traders – revealed that on Wednesday, net trade sentiment stood at $82,700.

To be sure, that’s not a whole lot of money. However, the total premiums of options associated with bullish sentiment reached $184,300. The same exercise for bearish options was $101,600 below breakeven. In other words, dollar volume was nearly twice as much for optimistic options trades than pessimistic.

Moreover, the biggest premium during Wednesday’s trade stood at $50,800 for the 2024 Sept. 20 $15 call. This one trade accounted for 61.4% of the total net trade sentiment. With so much enthusiasm for M stock among the pros, this may present an opportunity for the intrepid.

Trade of the Day: Trust the Data and Buy Macy’s Stock Call Options

While the fundamentals seemingly point to doom and gloom for Macy’s stock, the smart money seems to think otherwise. Since the top traders on Wall Street have access to the best information and resources available, the data would seem to suggest that the retailer is a buy.

So, if you have nerves of steel, today’s Trade of the Day is as follows: buy Macy’s stock call options. Specifically, those who are truly bold may consider the 2025 Jan. 17 $17 call. An out the money (OTM) call, the current market price sits more than 8% below the $17 strike price. That’s a tall order. However, keep in mind two things.

First, Macy’s will likely release its second-quarter earnings report next week. For whatever reason, the company has a recent history of delivering strong results in Q2. It beat on both the top and bottom lines in Q2 of last year and in 2022.

Second, the $17 price point commands a history of representing both support and resistance. Moving forward, the bulls will naturally target this level, adding to the aforementioned call option’s intrigue. Plus, with the professional traders taking a contrarian view on Macy’s stock, this could be one of the bigger surprises this year.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.