Shares of brick-and-mortar retailer Macy’s Inc (NYSE:M) have traded in a choppy fashion this year, but they’re still higher by more than 23% in 2016. The initial post-election rally in Macy’s stock increasingly looks overdone, but shares might see further gains in coming months.
Like plenty of Americans, I enjoy the tradition of catching some of the Macy’s Thanksgiving parade each year, if only for a few minutes. As a trader and investor, however, I am more interested in catching the other Macy’s Thanksgiving tradition — the CNBC interview of Macy’s CEO and chairman Terry Lundgren on black Friday.
This year, Lundgren made the case for the continued existence of brick-and-mortar stores such as Macy’s and the importance of both the physical and online presence. While this is nothing new, in conversations I have been having with investors this year, it has become increasingly clear that many of them view the (physical store) retail industry as dead.
As a somewhat of a retailer stock aficionado, I respectfully disagree. I believe a successful integration and mix of online and physical stores that also allows for maximum profitability is the model of the future.
To get right to the point, I believe that Macy’s stock could be well-positioned to flourish in this new environment.
Macy’s Stock Charts
On the multiyear weekly chart, we see that M stock after a steady multi-year rise topped in July 2015 and began a sharp and precipitous drop that did not bottom until this past May.
Along the way, the stock broke just about any technical support area except for the 61.8% Fibonacci retracement of the entire rally from the 2009 lows up into the 2015 highs.
From this angle, Macy’s stock still looks plenty broken but the year-to-date sideways chop may be a better base from which the stock could ultimately push higher from again.
On the daily chart, we see that M stock — like many retail shares — rallied strongly following the early November election results. As a result, it bumped into horizontal technical resistance late last week.
In the process, Macy’s stock became notably overbought both from a price and a momentum perspective. Last Friday, M started showing initial signs of exhaustion and marked the daily chart with a bearish engulfing candle. This was followed yesterday Monday by a follow-through selling day that as a result mean-reverted the stock back to its blue 8-day simple moving average.
From here, while Macy’s stock remains near-term constructively positioned, more sideways to downside consolidation may be needed before a break above horizontal resistance near the $45 mark can occur.
Quick traders could try to play Macy’s stock to the downside for a potential move into the low $40s. More conservative market participants may want to wait for a next bullish reversal to sink their teeth into the stock from the long side.
If and when M stock can break above $45, it has a next upside target closer to the $50 mark.
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