Struggling Retail Stock Flashing Bear Signal

Nordstrom adopted a "poison pill" last month

Digital Content Manager
Oct 19, 2022 at 1:53 PM
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There's been plenty of buzz about department store retailer Nordstrom, Inc. (NYSE:JWN) lately. Earlier this week, the company announced its Chief Financial Officer (CFO) role would exchange hands by year end, and just last month, the company adopted a "poison pill," after Mexico-based peer bought a 9.9% passive stake in the company. This so-called "poison pill" will prevent investors from amassing more than 10% of Nordstrom's shares. The equity has seen its fair share of choppy trading amid all this, with several attempts to close up a late-August bear gap met with resistance at the $20 mark. Another layer of resistance has emerged at the security's 70-day moving average, too, which could spell out even more trouble for JWN in the coming month. 

A study from Schaeffer's Senior Quantitative Analyst Rocky White shows Nordstrom stock coming back within on standard deviation of this trendline after a lengthy period below here. According to this study, there have been seven similar instances in the past three years. The equity dropped lower one month later 71% of the time, averaging a drop of 8.2%. A similar move from its current perch at $19.16 would put at $17.58, which coincidentally marks the level the security bounced from late last week.

jwn oct 19

Analysts are hesitant on JWN, with just three of the 14 in coverage calling it a "strong buy." Meanwhile, short sellers are starting to hit the exits, off 7.3% in the last two reporting periods, though these bears are still firmly in control. Short interest makes up 23.6% of the stock's available float, or over three days' worth of pent-up buying power. 

With all his said, now might be a good time to speculate on JWN's next move with options. The security's Schaeffer's Volatility Index (SVI) of 67% stands higher than just 26% of annual readings. In other words, options players are pricing in relatively low volatility expectations at the moment. 


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