Macy's, Inc. (M) is America's premier mall anchor with nearly 1,000 Macy's and Bloomingdale's stores. Macy's had been feeling the drag of losing sales to online retail giant Amazon.com, Inc. (AMZN) since mid-2015, but this has not been the case so far in 2018. Macy's stock closed Tuesday, Aug. 7, at $39.47, up 56.7% year to date and solidly in bull market territory at 75.7% above its 2018 low of $22.47 on Feb. 6. Meanwhile, Amazon stock is up 59.3% year to date and is also solidly in bull market territory at 47.1% above its 2018 low of $1,265.94 on Feb. 9.
Analysts expect Macy's to post earnings per share of 48 cents when the mall anchor reports results before the opening bell on Wednesday, Aug. 15. Macy's reported solid fourth quarter earnings on Feb. 27 and followed with another solid earnings report on May 15. The stock popped higher following both these reports, leading to its 2018 high of $41.33 set on June 7. Shares of Macy's have been benefiting from the lower tax rate and real estate sales. Macy's is also benefiting from expanding its off-price Backstage stores and increased online sales. (See also: 'Retailpocalypse' Is Over – Macy's a Bargain: Bulls.)
The daily chart for Macy’s
Macy's has been above a "golden cross" since Jan. 16, when the stock closed at $25.92. A "golden cross" occurs when the 50-day simple moving average moves above the 200-day simple moving average, indicating that higher prices lie ahead. On Feb. 6, investors could have added to positions on weakness to the 200-day simple moving average then at $23.10. The horizontal lines show that the stock is between my quarterly value level of $28.02 and my monthly risky level of $41.35.
The weekly chart for Macy's
The weekly chart for Macy's is positive, with the stock above its five-week modified moving average of $37.87 but below its 200-week simple moving average at $40.57, which is also the "reversion to the mean," last tested during the week of Nov. 6, 2015, when the average was $50.90. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 77.92 this week, up from 76.13 on Aug. 3.
Given these charts and analysis, investors should buy Macy's shares on weakness to my quarterly value level of $28.02 and reduce holdings on strength to my monthly risky level at $41.35. A breakout above the 200-week simple moving average of $40.57 would enhance the upside potential. (For more, see: Retail Stores Aren't Dead in Amazon Era: Moody's.)