Macy's, Inc. (M) shares have gained considerable ground since hitting a seven-year low in the mid-teens in November, lifting back into the mid-$20s, but aggressive sellers could return in the coming months. Brick-and-mortar retailers are still losing market share to, Inc. (AMZN) and other e-commerce giants, while belated efforts to recapture lost customers have slowed but not stopped this technological phenomenon.

The mall anchor has benefited from a one-time tax windfall and restructuring plan that will close 11 stores in early 2018, while a 1% holiday sales gain encouraged Macy's to raise fiscal-year guidance last month. However, the company still expects to report sales declines in excess of 2%, telling market players that the paradigm shift that has rocked the retail industry in the past decade is far from over. (See also: Macy's Begins Parade of Earnings From Retailers.)

Macy’s Long-Term Chart (1992 – 2018)


Macy's came public at a split-adjusted $8.63 in February 1992 and entered a shallow decline that bottomed out at $5.63 a few months later. A bounce into 1993 cleared resistance at the IPO opening print, generating an uptrend that topped out in the upper-$20s in 1998. A 1999 test at that level attracted aggressive selling pressure, triggering a volatile downtrend that continued into the 2000 low at $10.50.

It tested that support level more than three years later, bouncing at $11.76 and completing a double bottom reversal, ahead of a strong uptrend that continued through the mid-decade bull market. It finally cleared the 1998 high in 2005 and entered a rising channel that persisted into 2007, when the stock topped out just below $47. A pullback into 2008 accelerated during the economic collapse, dumping to an all-time low at $5.07 in November.

A bounce into the new decade unfolded at the same trajectory as the prior decline, reaching the 2007 high in 2013 and breaking out in a healthy advance that posted an all-time high in the low $70s in the third quarter of 2015. The retail sector then turned tail in a brutal downtrend, dropping Macy's in a series of selling waves that continued into November 2017, when it posted the lowest low since 2010. (For more, see: Macy's and the Day Retail Died.)

Macy’s Short-Term Chart (2015 – 2018)


A Fibonacci grid stretched across the 2015 into 2016 decline places the .382 retracement level near $38, marking potential upside if the company continues to report positive results and restructuring progress. The pattern shows rough alignment with monthly-scale rally retracements, placing the .618 level just above $31. Coincidentally, the unfilled January 2017 gap connects these harmonic points, stretching between $36.40 and $31.85, possibly acting as a magnetic target in coming weeks.

On-balance volume (OBV) has performed much better than price in recent years, signaling a healthy supply of dip buyers, bottom fishers and value hunters. It rose briefly to an all-time high in December 2016, when price was trading 30 points below the 2015 high, and spiraled into a multi-year low in the fourth quarter of 2017. Healthy buying pressure since that time has lifted the indicator relatively close to the prior high, which could be reached following a few additional days of higher-than-average buying pressure.

The November 2017 bounce stalled just above the 200-day exponential moving average (EMA) in December, with price action since that time carving a volatile megaphone pattern. This process has shaken out weak-handed sellers while building a base that could support further upside, predicting that a rally above $28 after this week's report will open the door to the $30s. Conversely, a decline through $23 will confirm a failure that could presage a decline into last year's deep low. (See also: Macy's Holiday Parade Ended on Christmas.)

The Bottom Line

Macy’s continues to report customer losses, but the worst may be over for now, with the stock bouncing in 2017 at deep harmonic support. Even so, aggressive sellers could return later in 2018 because adverse industry forces continue to gain traction. (For additional reading, check out: Macy's Holiday Sales Update Leaves Investors Cold.)
<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>

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