Nordstrom, Inc (JWN) is a luxury mall anchor that has been slumping badly so far in 2019. The stock has been sliding toward its five-year low of $35.01 set in July 2016. The retailer is due to report results after the closing bell on Tuesday, May 21.

Nordstrom stock closed Monday, May 20, at $37.46, down 19.6% year to date and in bear market territory at 44.7% below its 2018 intraday high of $67.74 set on Nov. 6. The stock set its 2019 low of $36.37 on May 17, nearing its monthly value level at $36.08.

Analysts expect Nordstrom to post earnings per share of 44 cents when it reports results on Tuesday afternoon. The stock is cheap fundamentally with a P/E ratio of 10.27 and a dividend yield of 3.99%, according to Macrotrends.

The retailer must offer solid guidance to hold its semiannual value level at $36.79, or the stock will likely suffer a lower five-year low. Earlier in the quarter, Nordstrom warned that a quick performance rebound is not in the cards. The status of excess inventory will be a key metric to observe.

The daily chart for Nordstom

Daily chart showing the share price performance of Nordstrom, Inc (JWN)
Refinitiv XENITH

The daily chart for Nordstrom shows that the stock has been below a "death cross" since Jan. 9, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices lie ahead.

The stock ended 2018 at $46.61, which was an important input to my proprietary analytics. Its semiannual value level is below the chart at $24.88, and its annual risky level is at the top of the chart at $64.11. The close of $44.38 on March 29 was also an input to may analytics, resulting in a quarterly risky level at $50.70. The April 30 close of $41.02 was the most recent input to my analytics, and the monthly value level for May is $36.08.

The weekly chart for Nordstrom

Weekly chart showing the share price performance of Nordstrom, Inc (JWN)
Refinitiv XENITH

The weekly chart for Nordstrom is negative but oversold, with the stock below its five-week modified moving average of $40.57. The stock is below its 200-week simple moving average, or "reversion to the mean," at $50.19. The 12 x 3 x 3 weekly slow stochastic reading is projected to fall to 10.47 this week, down from 12.23 on May 17, well below the oversold threshold of 20.00. If this reading falls below 10.00, the stock will become "too cheap to ignore."

Trading strategy: Buy Nordstrom shares on weakness to the monthly value level at $36.08 and reduce holdings on strength to the quarterly risky level at $50.70.

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.