PreMarket Prep Stock Of The Day: Macy's

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Although trading ranges can be boring, they can provide future trading opportunities that may turn out to be profitable.

On Wednesday, the 14-day trading range in Macy’s Inc. M resolved to upside, making it the PreMarket Prep Stock of the Day.

Macy's Pre-Earnings Pops: The Street decided to lean into Macy's before its first-quarter report in May — big time.  

Besides a positive mention on CNBC, there was no major catalyst for Macy’s having its best one-day performance since March 15.

On Friday, May 14, Macy's had a mysterious rally from $15.86 to $18.08 on nearly double the previous day's volume.

Macy's Q1 Beat: Before the open on Tuesday, May 18, the company reported quarterly earnings of 39 cents per share, which beat the analyst consensus estimate of a 41-cent-per-share loss by 195.12%. 

This was a 119.21% increase over losses of $2.03 per share from the same period last year. Also, quarterly sales of $4.71 billion beat the analyst consensus estimate of $4.36 billion by 7.94%.

This is a 55.98% increase over sales of $3.02 billion in the same period last year.

That instigated a continuation rally of another $1.08 to $19.16, for a two-day return of 21%. 

Although the issue made a new high ($19.65) on earnings day, it ended the session slightly in the red by 7 cents at $19.09. 

Consolidation Station: Over the next 14 days, Macy's traded in a well-defined trading range from $17.85-$19.05, with a vast majority of the volume occurring in the mid-$19 handle.

Most likely large buyers were targeting the $18 level, and large sellers were targeting $19. Active scalpers nibbled in between.

The Macy's Set-Up: On Tuesday of this week, Macy’s danced in between the two boundaries of the trading range ($18.07-$18.90) and settled in upper portion of the range, higher by 4 cents at $18.68.

As a result, the issue would have less distance to travel, based on its average trading ranges, to take out the institutional sellers stacked at $19.

After a higher open Wednesday, it had a brief retreat and found support just under the close at $18.61 and resumed its move higher.

Yet increased volume easily absorbed the sellers at the $19 area.

Also, traders who had been leaning on that level to short and had been profitable time and time again were forced to cover. In addition, chart recognition algorithms pounced on the breakout and added fuel to the fire.

Macy's Moving Forward: At this time, the issue pierced the $20 level, reaching $20.38, but has fallen back into the $19 handle. If old resistance is going to be new support, $19 may act as support on any decline.

For follow-through on the upside, the issue must first clear the current high and challenge the pair of highs from the $21 area from mid-March. Interestingly, those highs were the highest level for the issue since August 2019.

Macy's shares were down 2.6% at $19.08 at last check Thursday.