Macy's, Inc. (M) is America's premier mall anchor, and the stock has become "too cheap to ignore" given a P/E ratio of just 5.52 with a dividend yield of 6.72%, according to Macrotrends. The stock is trading at a 52-week low and is nearing its value level for May at $20.17.

Shares of Macy's closed Monday, May 13, at $21.56 after setting a 52-week low of $21.43. The stock is down 27.5% year to date and in bear market territory at 48.6% below its Aug. 14 intraday high of $41.99 set on Aug. 14.

Analysts expect Macy's to post earnings per share of 36 cents when the mall anchor reports results before the opening bell on Wednesday, May 15. The retailer has beaten estimates for seven consecutive quarters. Macy's continues to struggle with its e-commerce strategy versus foot traffic in stores.

The daily chart for Macy's

Daily chart showing the share price performance of Macy's, Inc. (M)
Refinitiv XENITH

Macy's has been below a "death cross" since Dec. 3, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices would follow. On Dec. 4, investors could have reduced holdings at the 200-day simple moving average at $34.10, which was a perfect setup before the mall anchor issued a warning on Jan. 10, which is shown on the chart as a huge price gap lower.

The stock closed Dec. 31 at $29.78, which was input to my proprietary analytics. Its annual risky level is above the chart at $51.56. The close on March 29 at $24.03 was another input to my analytics and resulted in a second quarter risky level at $25.91, which was tested on April 4 as a level at which to reduce holdings. The close of $23.54 on April 30 was also an input to my analytics, and the value level for May is $20.17.

The weekly chart for Macy's 

Weekly chart showing the share price performance of Macy's, Inc. (M)
Refinitiv XENITH

The weekly chart for Macy's is negative, with the stock below its five-week modified moving average of $23.50 and below its 200-week simple moving average, or "reversion to the mean," at $33.41, which was last tested during the week of Aug. 17, when the average was $40.47. The 12 x 3 x 3 weekly slow stochastic reading is projected to fall to 25.51 this week, down from 34.03 on May 10.

Trading Strategy: Buy Macy's stock on weakness to its monthly value level at $20.17 and reduce holdings on strength to its quarterly risky level at $25.91. 

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February, March and April. The quarterly level was changed at the end of March.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.