Want to shop at Macy’s (M)? Here’s how you do it. (January 21, 2016)
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I want to look at Macy’s ( NYSE:M ) today. This is a trade that Bridgette, who works with me and Gary in trading ideas, reference management, and also is one heck of a behind of the scenes person that knows a thing or two about coding and Internet stuff, and she is a lot smarter than me. She had mentioned this to me today, that Macy’s ( NYSE:M ) is still going. You can look and see, this is a stock had been bottom or maybe just another move to the 50-day moving average like we got here, and then another move lower. Because after all it would be $39.00 above ultimate support at zero. So it drifts here and then, Boom! Starts to go through, and now here we are, we’ve got the makings of a bottom, of a base, of a something.
But this is up above the 50-day moving average, which is someplace that it hasn’t been for many, many months, and I think this bears watching. The way you trade this, if you want to, is not just to go all in, say, “Okay, I’m in because it’s above the 50-day moving average.” No. You take SOME stock, look at the weekly chart, you can see what it really looks like, it still looks pretty ugly, but hey man this thing has got to turn around at some point. So you take SOME stock here and then you only buy more at a higher level, it’s true, only buy at a higher level, thus increasing your cost basis of course, but after you’re getting confirmation, but you’re correct on the trade.
Now you’re profitable, now you’re trading, if instead you buy some and then the stock goes down, and then you buy some more, if that WASN’T part of your original plan, then you’re surprised. And if you’re surprised and you’re buying more, you’re losing money. And if you’re losing money that doesn’t feel very good, ask anybody who’s been trading the last couple weeks. So you don’t want to be averaging down. I know some guys do it, a lot of money managers do it, but they’re also the ones that say, “We’re in for the long haul.” And that’s what you say when you’re long a bunch of losing positions.
I’m saying if you just want to be trading for profit, then you want to be ADDING up, you want to be AVERAGING UP as the stock confirms the correctness of your decision. You take on more risk, you take on more stock, that’s the way, in my view, I would trade Macy’s ( NYSE:M ). And by the way, you take some stock here and then the stock falls to 38.00 or 36.00 or whatever. Well, aren’t you glad you didn’t get a boatload? Sure you’re not adding more but you’re not taking such a big loss as you would if you had just piled in here and said, “I’m going to sell this when it gets up to 50.00” Well shoot, me too. So instead take a little bit of stock, if you like this idea, and then only be buying if stock continues to work in your favor.
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