Author: Andrew Keene
Macy’s, Inc (M) is a luxury retailer with omnichannel operations and 823 brick and motor stores. The company’s stock is currently trading around $47.00 in a 52 week range of $45.83-$73.61. The stock has been massively underperforming the market this year with shares selling off 28.5% year to date. Macy’s is set to report their most recently quarterly earnings report ahead of the open tomorrow and it looks like the stock might be primed for further downside on the report.
M has sold off 7 of the past 12 quarters on earnings day with an average move of around 4.70%. The options market is implying a move of around $4.65 by Fridays close meaning the expected move for M on earnings is around 9.9%. In addition to the historical weakness we see in M the chart also implies bearish sentiment going into earnings. Although the stock is getting a bit of a bid today the overall trend is still decidedly bearish. The stock is trading well below the Ichimoku Cloud and the cloud is strongly negatively sloping. According to the cloud M has not been in bullish territory since late July.
With both historical and technical metrics setting uip for a short I want to get short M on earnings with a downside target of $42.35.
Potential Trade: Buying the M Nov 13th Weekly 43.5-42.5 Put Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
This trade offers a trader a better than 2-1 reward to risk setup.