Most of the price levels highlighted in Today’s Big Stock are of the horizontal variety. They’re easy to identify and easy to trade off of. However, from time to time I also like to discuss important levels that are somewhat of a “moving target” in the form of up or down trendlines. One stock forming an up trendline is that of Macy’s, Inc.
Macy’s, Inc. is a retail organization operating retail stores and Internet Websites under two brands, Macy’s and Bloomingdale’s, that sell a range of merchandise, including men’s, women’s and children’s apparel and accessories, cosmetics, home furnishings and other consumer goods in 45 states, the District of Columbia, Guam and Puerto Rico. As of January 29, 2011, the company’s operations were conducted through Macy’s, macys.com, Bloomingdale’s, bloomingdales.com and Bloomingdale’s Outlet. In 2011, the company sold its interest in The Knot, Inc. During the year fiscal ended January 29, 2011, the company opened four Bloomingdale’s Outlet stores.
To review Macy’s stock, please take a look at the 1-year chart of M (Macy’s, Inc.) below with my added notations:
After bottoming at $23 in August of last year, M has been in a steady up trend ever since. Along the way, the stock has formed a nice trend line of support (navy). Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. Obviously M’s trend line is very important to the stock since it has been tested on multiple occasions.
The Tale of the Tape: M has created a nice trend line of support over the last (6) months. A long position could be entered on a pullback to the trend line support, which is currently sitting around $39, with a stop placed under the entry. A short position could also be entered if M were to break the trend line of support.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT