Macy's, Inc. (M) was America's premier mall anchor, but the malls and their stores are currently empty. The stock traded below $5 per share and is now rebounding from oversold territory on its weekly chart.

The fundamentals say that Macy's stock is "too cheap to ignore," but can you trust the numbers? The company has P/E ratio of just 1.93, but the retailer dropped its dividend yield of 7.43% down to 0.00%, according to Macrotrends.

As long as spreading COVID-19 is the headline story, the malls will be closed. My proprietary analytics suggest that Macy's stock could potentially move back below $5 per share, as its monthly value level is $3.22.

Shares of Macy's closed Tuesday, April 7, at $5.91, down 65.2% year to date and deep into bear market territory at 77.1% below the 52-week high of $25.76 set on April 24, 2019. The stock traded as low as $4.38 on April 2 and is currently 34.9% above this low.

Before the malls closed, Macy's stock was under pressure, as most of the goods on the store racks were subject to the trade war and increasing tariffs. This put pressure on margins. Some on Wall Street expected the strong dollar and soft global economies to be a drag on purchases by international tourists.

Back on Aug. 9, 2017, I warned about a "death cross" for shares of Macy's. My theme then was that the stock turned lower in July 2015 as Amazon.com, Inc. (AMZN) was taking significant sales from mall anchors.

The daily chart for Macy's

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

Today's daily chart for Macy’s shows the decline that has occurred under a "death cross," which formed when the 50-day simple moving average fell below the 200-day simple moving average. This sell signal indicated that the stock would be moving lower.

As 2020 began, the stock tested its semiannual risky level at $18.47, which proved to be a great level at which to sell the stock. The stock is now below its second quarter risky level at $12.44.

Below the chart is the monthly value level for April at $3.22. Macy's stock is trading well below its 50-day and 200-day simple moving averages at $11.21 and $15.72, respectively.

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 but oversold, with the stock below its five-week modified moving average of $8.85. The stock is below its 200-week simple moving average, or "reversion to the mean," at $26.65. The "reversion to the mean" was last tested during the week of Aug. 17, 2018, as a selling opportunity when the average was $40.47.

The 12 x 3 x 3 weekly slow stochastic reading is projected to fall to 10.14 this week, down from 11.70 on April 3. If this reading falls below 10.00, Macy's stock would be technically "too cheap to ignore."  

Trading strategy: Buy Macy's stock on weakness to its monthly value level at $3.22. Reduce holdings on strength to its second quarter risky level at $12.44.

How to use my value levels and risky levels: The stock's closing price on Dec. 31, 2019, was an input to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.

Second quarter 2020 and monthly levels for April were established based upon the closing price on March 31. New weekly levels are calculated after the end of each week, and new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels are in play all year long.

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. A reading above 90.00 is considered an "inflating parabolic bubble" formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered "too cheap to ignore," which is typically followed by gains of 10% to 20% over the next three to five months.

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