Macy's, Inc. (M) is America's premier mall anchor, and its stock has become "too cheap to ignore" both fundamentally and technically. Macy's has a P/E ratio of just 5.78 with a dividend yield of 6.28% according to Macrotrends. Chart wise, the stock is above my quarterly value level at $22.27, and its weekly slow stochastic reading is below 10 on a scale of 0 to 100, which is my definition of being "too cheap to ignore."
Macy's shares closed last week at $24.06, down 19.2% so far in 2019 and in bear market territory at 42.7% below the Aug. 14 high of $41.99. The stock set its 52-week low of $23.95 on Friday, Feb. 22, still above its multi-year low of $17.41 set during the week of Nov. 10, 2017, when the mall anchor was feeling the most pain from online retail giant Amazon.com, Inc. (AMZN). Macy's stock set its all-time intraday high of $73.61 in July 2015, when the pinch from Amazon began.
Analysts expect Macy's to post earnings per share of $2.60 to $2.65 when the mall anchor releases quarterly results before the opening bell on Tuesday, Feb. 26. The retailer has beaten estimates for six consecutive quarters. Macy's also owns department store Bloomingdale's. Investors have become cautious on Macy's turnaround since the retailer shocked the market in January by reporting weakening sales in women's sportswear, fashion jewelry and cosmetics.
The daily chart for Macy's
Macy's stock has been below a "death cross" since Nov. 30, when the 50-day simple moving average (SMA) fell below the 200-day SMA, indicating that lower prices would follow. On Dec. 4, investors could have reduced holdings at the 200-day SMA at $34.10, which was a perfect setup before the mall anchor issued its warning on Jan. 10, as noted on the chart by a huge price gap lower.
The stock closed Dec. 31 at $29.78, which was input to my proprietary analytics, resulting in my quarterly value level below the chart at $22.27 and my annual risky level above the chart at $51.56. The close on Jan. 31 at $26.30 resulted in my monthly risky level at $31.61.
The weekly chart for Macy's
The weekly chart for Macy's is negative but oversold, with the stock below its five-week modified moving average of $25.93 and below its 200-week SMA, or "reversion to the mean," at $35.87, 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 fell to 9.12 last week, down from 10.61 on Feb. 15 and falling below 10.00, making the stock "too cheap to ignore."
Trading Strategy: Buy Macy's shares on weakness to my quarterly value level at $22.27 and reduce holdings on strength to my monthly risky level at $31.61.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.