Retailer Macy's (M) reported its fourth-quarter results here on Tuesday morning and beat analyst expectations for earnings and revenue. In our Nov. 21 review of the charts and indicators of Macy's we wrote, "The fundamental story for M sounds like they have made a turnaround and comeback, and the stock price reflects it. Prices have reached a Point and Figure target and are what I would consider extended or overbought. This is the time to nail down profits on longs. You can still watch the parade on television but you will have money to splurge on holiday shopping if you so desire."
Our recommendation to take profits was well-timed, but that is old news in the investment world. Let's check out the charts again in light of Macy's new quarterly numbers.
In this daily bar chart of M, below, we can see that prices declined swiftly from $38 down to $23 and then turned sideways. Prices look like they have been finding buying interest (support) around $24 and we can see a test of the rising 200-day moving average line in late January. Prices are just above the bottoming 50-day moving average line. The trading volume has been choppy since the middle of November but the On-Balance-Volume (OBV) line has been largely steady the past four months, which suggests that longer-term investors have largely stayed with their positions. The Moving Average Convergence Divergence (MACD) oscillator turned up in December for a cover shorts buy signal and is now close to crossing the zero line for an outright buy message.
In this weekly Japanese candlestick chart of M, below, we can see a number of recent doji patterns telling us that there is a balance between bulls and bears. The small real bodies or no bodies tell us that from Monday to Friday neither side is getting the upper hand. The slope of the 40-week moving average line is positive. The weekly OBV line shows improvement from December and is stronger than the daily chart. The MACD oscillator is pointed down but narrowing toward a possible bullish crossover.
In this daily Point and Figure chart of M, below, we can see that prices met an upside price target in the $29 area. A trade at $29 or higher should refresh the uptrend.
In this weekly Point and Figure chart of M, below, we can see that the software has counted the X's and O's and has come up with a potential $44 price target.
Bottom line strategy: Traders could probe the long side of M around $26, risking to $22. In this current unsettled market environment I think traders do not need to buy M on strength. My price targets for now are $34 and then $44.
