Want to do some shopping? Try Macy’s (M). No, not the store. The stock! (March 14, 2018)
M
I want to look at Macy’s ( NYSE: M ). I mentioned this in this morning’s Morning Market Thought note that it is something to watch. I am not a Macy’s ( NYSE: M ) guy but in any event the stock has broken out of this downtrend; if we’ve to classify all the patterns here, it formed a broadening formation and then finally broke out the upside and now it is in this little flag pattern; there, I have organized chaos.
Here is the thing for me: I am just looking at this as the 200-day moving average is starting to move higher. The 50-day moving average moving higher. The price up in what is really kind of a fairly tight flag pattern and it is very close to it’s 52-week high, about 6 or 7 percent lower. It is still well below it’s all-time high but if you are just going back the last year this is actually pretty close to that.
In other words, if you are looking at this here, right here right now, this red box here is basically empty for quite a while. Why am I doing this other than the fact that I like the coloring aspect of this video software? It is because I want to show you how, when the stock moves up there is really no supply from losing traders. There is nobody in here that has been sitting on their stock waiting to get rid of it. Trust me, anybody who wanted to get rid of it has dumped it somewhere along the line. Somewhere down here or up here. So, for the most part, this is kind of like blue-sky territory IF the stock can push out above $30.00. It tried to do that yesterday, didn’t quite make it.
So this is what I would suggest doing: I would suggest putting an alert on your trading software. You can set a buy alert if you want, a buy limit order. Let’s say run this up to 30.35. You could set a buy alert so if the stock ran above 30.35 you are in. That is a good indication that a stock running up this high is probably breaking out of this flag pattern and is going to continue to move.
Another strategy for you option traders who want to juice your returns a little bit is to do what is called a “covered straddle”. Where you buy the stock and sell the call, that is a covered call. Buy the stock at 29.23; maybe sell the $30.00 calls. As I look at them here you will get about $1.10 for them. And so if you are called out of the stock at $30.00 you will have made $1.00; if you are getting $1.10 for them you add that to the 77 cent profit here. So you make a nice move here and then you could also sell, we are going really, really tight here, you can also sell the 29.00 puts. You get about $1.30 for those.
So what you are really doing is, you are bracketing this by selling a call where you get money in the bank. Sell the put where you get money in the bank. One of them is going to expire worthless. If the stock stays at the current level both of them are going to expire worthless. But let’s say the stock continues higher, which I kind of expect it to do. You get to keep the $1.10 that you got for selling the $30.00 call. You get to keep the 1.25 or 1.30 that you got for selling the $29.00 put. That is just money in your pocket; not to mention, again, the 77 cents that you are making just from between where you are buying it now and $30.00. So 77 cents doesn’t seem like a lot, right? But when you add $1.30 to that and then we’ll say $1.10 on top of that, that is 240 pennies plus 77 pennies, which is $3.17; basically more than a 10 percent return on a fairly high probability trade here.
I just wanted to show that to you in Macy’s ( NYSE: M ), where you can kind of combine some technical analysis with some options trading and set up a pretty nice low-risk trade.
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