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Financial Services

In a big week for retail earnings, technician says only one is a standout

It’s retail’s time to shine this earnings season with industry leaders Walmart, Nordstrom and Home Depot each set to report quarterly results this week.

Only one retail name looks like a winner to Mark Newton, technical analyst at Newton Advisors.

Macy’s looks like the real standout candidate to me among the group,” Newton told CNBC’s “Trading Nation” on Friday. “It started to show real momentum last November and the stock has more than doubled off the lows, but yet it still remains well off the highs it made a few years back.”

Macy’s has raced ahead of the rest of the retail space so far this year. The department store chain has surged nearly 60 percent, more than four times the increase in the XRT retail ETF.

The stock has also formed a cup-and-handle pattern since June, said Newton, a technical price movement characterized by a rounded move lower then higher followed by a narrower trading range.

“After this big advance, the fact that the stock has really made this formation suggests to me that it’s right to position long,” said Newton. “I’m playing for a move right up above $41 that would get us back to highs right near $45.”

The retailer has not traded as high as $45 since November 2016.

Gina Sanchez, CEO of Chantico Global, is also bullish on Macy’s given her forecast for a market rotation into value over growth stocks. Value stocks typically outperform when an economy slows and investors favor companies with comparatively cheap valuations relative to their peers.

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“Be careful and go with the lower-valued names. Macy’s is a really, really good pick for that,” said Sanchez. “Macy’s is trading at something like 10 times earnings whereas the department stores have an average of 13 times as a historical average, so there’s actually still some momentum to be gained there.”

Macy’s is due to report earnings before the bell Wednesday. Analysts surveyed by FactSet anticipate 4 percent earnings growth, but flat sales in its July-ended quarter.


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