Retail giant Macy’s (M) has been chopping lower on the charts since notching a Nov. 18, three-year high of $37.95. The $28 level seems to have stepped in as a potential area of support, though, containing further losses while helping the equity maintain its impressive 165.2% year-over-year lead. Another reason not to dismiss Macy’s stock just yet is that this pullback has the shares trading near a trendline with historically bullish implications, which may help M bounce back over the coming weeks.
More specifically, Macy’s stock just pulled back to its 40-day moving average, after spending over one month above this key trendline. According to data from Schaeffer\’s Senior Quantitative Analyst Rocky White, similar moves have occurred three times over the past three years, with the security enjoying a positive one-month return 33% of the time, averaging a 9.5% pop. From its current perch, a comparable move would put M back above the $30 mark.
There is room for improvement amongst the brokerage bunch. Of the eight analysts covering M, six call it a tepid “hold” or worse. Should some of these firms start to change their tune, shares could surge even higher. Plus, the equity looks ripe for a short squeeze. Short interest rose a whopping 127.7% in the most recent reporting period, and the 108.65 million shares sold short account for 35.1% of the stock’s available float, or more than one week’s worth of pent-up buying power.
A shift over in the options pits would create additional tailwinds for Macy’s stock. This is per M’s Schaeffer\’s put/call open interest ratio (SOIR), which ranks higher than 92% of readings from the last 12 months. In other words, short-term options traders have rarely been more put-biased towards the equity.
It’s also worth noting the security has exceeded options traders\’ volatility expectations during the past year. More specifically, M’s Schaeffer\’s Volatility Scorecard (SVS) stands at a high 82 out of a possible 100.