Macy's Stock Flashes Bear Signal Before Holidays

Macy's stock could struggle this holiday season

by Patrick Martin

Published on Nov 29, 2018 at 12:23 PM

The shares of Macy's Inc (NYSE:M) are just two weeks removed from a post-earnings bear gap. What's more, the retail stock, heading into the all-important holiday season, just flashed a bearish signal that could lead to more short-term struggles, if history is any guide.

At last check, Macy's stock was down 2.5% to trade at $33.40. The shares are within one standard deviation of their 70-day moving average, with past run-ups to this moving average creating sell signals for M in the past.

According to Schaeffer's Senior Quantitative Analyst Rocky White, in the last two years, when M came within striking distance of its 70-day trendline, the shares went on to average a two-week loss of 5.11% and were never higher after. Widening the scope, they averaged a monthly loss of 8.34%, and were higher just 20% of the time.

Daily Stock Chart M

If past is precedent, this means Macy's stock could be trading back below the $31 level by Christmas. This region is home to the stock's mid-May pre-bull gap levels, and has served as an area of support in the last two months. Overall though, the equity boasts a 33% gain in 2018.

Options traders are certainly hoping for a repeat of history. This is based on the security's 10-day put/call volume ratio of 5.37 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), high enough to rank 3 percentage points from an annual high. This means puts have been bought to open over calls at a quicker-than-usual clip.

In addition, near-term open interest has become unusually put-skewed. This is based on the equity's Schaeffer's put/call open interest ratio (SOIR) of 2.58, which ranks in the 96th annual percentile. This hints at a rare level of skepticism among short-term speculators.

Those looking to speculate on Macy's stock's short-term trajectory may want to consider options. This is based on M's Schaeffer's Volatility Index (SVI) of 38%, which arrives in the 15th percentile of its annual range. In other words, low volatility expectations are being priced into short-term contracts.

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