Shares of department store operator J C Penney Company Inc (NYSE:JCP) continue to show relative strength versus the broader market. That’s good. JCP also is showing absolute price action that speaks to even more gains through a six-month lens.
That’s even better.
When I last shared a trade idea on JCP stock on June 24, I highlighted the strength of the overall retail sector on a year-to-date basis and pointed to recent bullish price action in JCPenney that looked to usher in better upside momentum still. The stock has endured a little choppiness since, mostly as a reflection of what the broader market did, but in the bigger sense, JCP stock still looks very well-positioned to push higher.
On the news side, things have been fairly quiet for JCPenney; earnings scheduled for mid-August are the likeliest next catalyst for shares.
However, , to “strong buy,” with noting some promising changes that the incoming CEO has been and continues to implement, including a focus on higher margin products.
JCP Stock Charts
To start off, let’s first look at a ratio chart of JCP stock versus the SPDR S&P 500 ETF (NYSEARCA:SPY), which clearly shows the relative strength of the stock since late 2014. While this relative strength has been range-bound since April when JCPenney reached its year-to-date highs, the trend and pressure remains higher.
Moving on to the price charts of JCP stock, the long-term picture remains as contrarian bullish as it was a few weeks ago. The stock is still trading below 2001 lows, and given the consolidation phase below below this area (black horizontal) for the past 18 months — which also has seen positive divergence between momentum and price (higher lows in momentum) — the path of least resistance still looks higher.
The diagonal line of resistance from the 2007 top also still serves as a good reference point, but this is a bigger-picture reference area, not something to build specific trades around.
On the daily chart, we see that a series of higher lows since December 2014 has been pushing against the diagonal line of resistance from last September, which on July 7 succeeded to break higher. Also note that the 100-day simple moving average (blue line) has been holding as good support since March, which is to say that a significant break thereof would be a good sign that the near-term upside momentum has faded.
From a risk management perspective, considering that JCP stock in percentage terms is still a pretty volatile mover, active investors and traders would be wise to use smaller-size trades but wider stops and targets so as not to get stopped out on any less-than-significant moves.
Active investors and traders can still look to buy JCPenney around the $9 mark for a move into the $10 area and a stop-loss near $8.40.
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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, . As of this writing, he did not hold a position in any of the aforementioned securities.
