The equity could flirt with new highs again soon, if history repeats
Shares of department store giant Macy's Inc (NYSE:M) are modestly higher this afternoon, last seen at $32.92. The stock has been falling on the charts of late, but just this week has come within a chip-shot of a historically bullish trendline. Below, we will see how M stock has been faring, and learn why now may be the perfect time to bet on the retailer's bounce.
Macy's stock touched its an annual peak of $41.99 on Aug. 14. However, following a post-earnings bear gap the very next day, the shares have struggled, and are now testing their 200-day moving average -- a trendline that holds historically bullish implications for the department store shares.
According to Schaeffer's Senior Quantitative Analyst Rocky White, Macy's stock is now within one standard deviation of its 200-day trendline, after a lengthy stretch above it. There has been one similar signal of this kind in the past three years, after which Macy's stock saw a one-month gain of 27.48%. Another surge of this magnitude would put the shares back near $41.97 -- near new-high territory -- by early November.
Looking at options, data out of the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows M with a 50-day call/put volume ratio of 2.11, ranking in the 83rd percentile of its annual range. This indicates that more than twice the amount of calls have been purchased over puts during the past 10 weeks of trading. In other words, even amid the equity's pullback from new highs, options buyers have been more bullish than usual.
Lastly, now seems to be an attractive time for near-term traders to jump onto M stock with options. The security currently sports a Schaeffer's Volatility Index (SVI) of 35%, which sits in the low 7th percentile of its annual range. In other words, muted volatility expectations are being priced into short-term contracts.