Summary:

  • Macy’s (M) tanked 13% on Wednesday, after the company posted earnings that missed Wall Street expectations.
  • Based on its market cycles, we believe that while the stock may bounce in the near term, it still has downside risk going into November.

The company reported earnings per share of $0.28 and total revenue of $5.55 billion, compared to analyst estimates of $0.46 and $5.56 billion. Management lowered its earnings guidance to $2.85-3.05 per share, below the average analyst estimate of $3.07.

CEO Jeffrey Gennette said that, “We learned that the customer has very little appetite for cost increases,” referring to possible increased on clothing imported from China.

Our approach to stock analysis uses market cycles to project price action. Our analysis is that Macy’s is still in the declining phase of its current minor cycle. The stock has broken the low from which it started its cycle, which is a bearish indicator.

For over one year, the stock has been in a stair-step downward path, with cycle rhythms continually negative and failures at resistance. Our view is that through November any bounce is an opportunity to sell.

For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.