Department store operator/retailer J.C. Penney’s (JCP) fall from grace in recent years has been well documented. The analyst community’s seriously feisty opinions on both sides of the stock is almost Apple-esque (AAPL), which is a testament to how broad an audience is following this story.
The longer-term chart shows the stock’s dramatic 85.00% fall from the 2007 highs to the 2009 lows. Ever since the 2009 lows the stock has more or less treaded water but has also traded in a huge range between $14 on the lower end and $44 on the upper end.
Even though the stock has rallied around 20% off its November lows, it remains lower by nearly 45% on the year. As a result, on the longer-term chart above the recent pop doesn’t have much significance.
However, since the 2009 bottom the stock has displayed a good history of retracing to the important 50% and 61.80% Fibonacci retracement levels of a swing, before ultimately heading lower again.
If we take the swing from the February highs to the July lows for example, note that by September 19th J.C. Penney (JCP) had retraced somewhere between 50% and 61.80% of said swing, at which point it again continued to move lower.
The current bounce off the November lows may well seem a bit much in just three weeks. Indeed momentum oscillators are moving higher and the stock may need a little breather before continuing higher. However, so far J.C. Penney (JCP) has only retraced its latest swing (October highs to November lows) by not quite 38.20%. Given the stock’s history of retracing to the 50% or 61.80% levels, it may well have upside to around $21.30 or $22.70 respectively.
Whether or not the stock will ultimately fail lower again I don’t know, nor is it my focus in the near-term. For now I am looking for the stock to run into a better resistance area, which I currently see to be between 10% and 18% higher from where the stock closed on Tuesday December 11.
