Macy's Needs to Prove Itself on the Charts

 | Feb 08, 2018 | 10:53 AM EST
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We looked at Macy's (M) in early December and commented that, "The charts of M have improved in recent weeks. Management has been working on reinventing this iconic company but more work needs to be done and a broader base on the charts could always help, in my opinion. Traders inclined to trade M from the long side should wait for a reaction down toward $22 and then risk below $19."

With the increased volatility in the board stock market in recent days traders just got that reaction down toward $22. Now what?

In this daily bar chart of M, below, prices broke below the rising 50-day moving average line but found buying support around the still declining 200-day line. It will not take much of a rally now for M to move back above the 50-day average.

The On-Balance-Volume (OBV) line shows a divergence from the price action in January. M made a new high last month but the OBV line made a lower high suggesting that buying was weakening. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been weakening since the middle of December and could soon cross below the zero line for an outright sell signal.

In this weekly bar chart of M, below, we have a less robust picture of the price action in my opinion. Prices are above the 40-week moving average line but the line still has a bearish slope. It will take a while for this moving average to flatten out and start rising. The weekly OBV line shows that it has "stalled" in the past two months. The weekly MACD oscillator is barely above the zero line and is starting to narrow suggesting that the trend is weakening.

In this Point and Figure chart of M going back several years we see a multi-year downtrend. M could weaken further towards $19 and will take a rally to $28 to give us a small triple top breakout.

Bottom line: M needs to rally above $26 to get above the 50-day average and above $28 for a Point and Figure breakout. Longs should risk a close below $22.

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