Macy's Gives Nordstrom Stock a Lift Ahead of Earnings

Nordstrom will report earnings after tomorrow's close

by Karee Venema

Published on May 16, 2018 at 11:45 AM

Retail earnings are in full swing, with Macy's (M) strong quarter giving a lift to the broader sector today. Shares of Nordstrom, Inc. (NYSE:JWN) are up 0.6% at $50.15 ahead of the department store's own first-quarter results -- due out after tomorrow's close -- even after a Securities and Exchange Commission (SEC) filing showed David Einhorn's Greenlight Capital dissolved its stake in the retailer.

Looking closer at the charts, JWN's price action in has been choppy in 2018, though its 200-day moving average has served as a floor since the stock gapped above this previous layer of resistance in late November. While the security bounced from here on April 19, its short-lived mid-May pullback was cushioned by the 120-day trendline. Year-to-date, the shares are currently maintaining a nearly 6% lead.

jwn stock daily chart on may 16

History suggests this volatility could continue in Friday's trading. Over the past eight quarters, JWN stock has averaged a single-day post-earnings move of 6.1%, with the options market pricing in an even bigger 10.6% swing this time around, regardless of direction. A move of this magnitude to the upside would put Nordstrom stock north of $55 for the first time since December 2016, while a swing to the downside would have the shares testing support at their 200-day trendline.

There's plenty of skepticism being priced into Nordstrom shares ahead of earnings -- which could help spark a rally on a positive earnings reaction. While short interest is down 17.3% since mid-March, there are still 16.18 million shares dedicated to these bearish bets. This represents 14.1% of the stock's available float, or 10.2 times its average daily pace of trading.

Elsewhere, 11 of 13 analysts covering the retail stock maintain a "hold" or "sell" rating, and the average 12-month price target of $51.19 is roughly in line with the equity's current perch. This leaves room for a round of upgrades and/or price-target hikes should JWN stock rise in the session immediately after earnings -- just as its done in five of the last eight quarters.

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