Macy's Is Still Not Attractive

 | May 17, 2017 | 9:02 AM EDT
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Macy's (M) continues to decline and has not yet found a level in the stock market to attract investors. The share price of this retailer has been cut from around $45 in late November to near $22 this week. Two relatively large downside price gaps (early January and this month) have helped to underscore the bearish state of affairs.

Are prices now cheap enough to entice scale down buying interest? Or can prices weaken still further before new support develops? Let's check the charts and indicators.

In this updated daily bar chart of M, above, we can see how the bear took control in late November. Prices quickly retreated back to around $38, which should have provided some support -- but that wasn't the case. M broke below the 50-day and the 200-day moving averages. A death cross of these averages comes later in early February after the big January gap.

The daily On-Balance-Volume (OBV) line has been in a downward trend since late November and tells us that sellers of M have been more aggressive, with heavier trading volume seen on days when M has closed lower on the day. In the bottom panel is the 12-day momentum study, and unfortunately it is not showing a bullish divergence, as the pace of the decline has not yet slowed.

The weekly chart of M, above, is not offering us any bullish clues at this time. Prices are below the declining 40-week moving average line and there is no nearby support on this chart.

The weekly OBV line is in a downtrend and poised to break below its December 2015 low. The weekly Moving Average Convergence Divergence (MACD) oscillator is in a bearish configuration, below the zero line.

In this Point and Figure chart, above, we can see the decline ignoring the intraday highs and lows and the price gaps. We also ignore volume on this kind of chart. What we have a hard time ignoring is the continued decline and the next possible downside price target or objective of $14.

Bottom line: heavy volume in the past week could mark a climax low for the price of M, but it is too soon to tell. Even if this was the end of the decline, we are likely to see these levels retested before any real bottoming process gets underway. The best buying opportunity may be in the store at 34th Street, rather than on Wall Street.

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