Short-Side Opportunity in Macy’s

Last Friday’s action across the broader U.S stock market saw plenty of weak-looking daily closes from individual stocks.  Among them were select department stores such as Macy’s, Inc. (M).

The stock continues to trade in an orderly up-trending channel if we look to the multi-year chart spanning back to 2009.  Along with plenty of other stocks, Macy’s, Inc. (M) went vertical and out of this longer-standing up-trend in early 2012 as investors chased stocks higher.  By July 2012 the stock did however find its way into the middle of the longer term uptrend.  After retesting this upper range again several times in the second half of 2012,  last week the stock managed to pierce out of and close above the channel for the first time in roughly twelve months.

On March 20th Macy’s, Inc. (M) staged an important breakout past a ten month long resistance point around $41.50, which ultimately led to the break out and above the longer standing up-trend.  Both last Thursday and Friday the stock tried at intra-day rallies, both of which however failed, leaving two bearish shooting star candles (candles with long top-tails at the top of a swing) behind on its daily chart.  Such weak daily closes should at the very least signal a warning to those long the stock.  For traders looking for a swing trade, the stock is now setting up a short-side trade.  The trade targets a re-test  of the March 20th breakout level around $41.50 and best of all offers clearly-defined risk;  Any daily break above last Friday’s high at $45.39 would instantly prove the trade wrong and allow for an emotionless stop-out.  Remember, any given trade either works or it doesn’t.  After all, trading is a game of probabilities and as long as losses are managed, i.e. kept as small as reasonably possible, this process allows us to move on to the next trade without any hesitation.

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