- Posted by JC Parets on September 17th, 2014 at 3:06 pm
The JC Penney trade is something that I’ve been actively involved with since early March. The bearish sentiment unwind that has sent shares soaring over the last 6 months has been one of the more fascinating things to witness in recent times. The amount of negative feedback I’ve received along the way has also been interesting to watch. People don’t believe the, “turnaround story”. Whatever that means. But we just like to focus on the supply and demand dynamics.
For a little bit of background, this name first grabbed my attention when it gapped higher in early March. This move came off bullish momentum divergences on both the daily and weekly timeframes. The huge short interest was also a major bullish signal (See: Blog Post and See: TV Interview).
Once our 30% upside target was hit two months later, prices continued to consolidate nicely. When prices keep bumping their head against a level, it’s almost inevitable that it will break through. This is precisely what we hoped for when I suggested in early June that $JCP had another 30% upside from that point. It was, “JCP the Sequel” for us (See: Blog Post and See: TV Interview)
Now I see shares of $JCP setting up in what appears to be a bullish flag. I don’t know of a better way for prices to digest big gains than in a high and tight range. This is precisely what we see here. Look at this tight consolidation in price since late August:
Also notice how momentum, based on a 14-day RSI, has been in a strong bullish range since early March. When prices rally, momentum gives us overbought readings, but never hits oversold conditions during corrections. In addition we have upward sloping 50 & 200 day moving averages which makes it difficult for the bears to gain control. These characteristics are exactly what we want to see in order to continue to maintain a bullish bias. Once prices break out of this range, this would be the confirmation that this is indeed a bull flag and a stock we would only want to own above the late August through early September highs.
Now as far as a price target is concerned, there are 3 reasons why the 12.40-12.90 area seems to be the most appropriate. First of all, our polarity principles teach us that former support should turn into resistance. In other words, where there were once buyers that eventually dried out, there should be sellers in control of that given price level. There was a double bottom in August of 2013 that broke down a month later. This former support is the first reason why this area is our next target.
From a Fibonacci perspective, I really prefer when several Fib extensions cluster around the same area. This is especially the case when we have former support and resistance levels confirming that area to be important. In this case we have two 261.8% Fibonacci extensions in the 12.60-12.90 area that we get based on the last two price corrections. The first being the March-April correction and the second more recently from mid-May to early June.
This is how I come up with my targets, when multiple levels cluster together. The market isn’t perfect, far from it. So to give a specific number makes little sense to me. I rather have some sort of area or range that I’m targeting and then reevaluate once we achieve that target. Since early March this is exactly what the strategy has been and it continues to work.
I’ll do my best to update this chart upon any further developments. But from a risk/reward standpoint, I think you guys get the idea.
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Audio: Q&A on Benzinga Morning Show
Posted by JC Parets on September 17th, 2014 at 10:39 am
Tuesday morning I was asked to come on the Benzinga PreMarket Prep show for a brief Q&A session about how I approach the global markets […]
A Look At Energy On Multiple Timeframes
Posted by JC Parets on September 16th, 2014 at 7:51 pm
We are thrilled to announce that we’re rolling out our new Eagle Bay Solutions research package this week that includes all of the S&P Sectors […]
Yahoo Runs Into Historic Overhead Supply
Posted by JC Parets on September 16th, 2014 at 9:46 am
Yahoo has had a parabolic run over the past two years to get back all the way to the early 2006 highs. The problem that […]
Join Me On Benzinga’s PreMarket Prep Show 9/16 9AM ET
Posted by JC Parets on September 15th, 2014 at 3:18 pm
Tuesday morning at 9AM ET I will be answering questions live on Benzinga’s PreMarket Prep Show. Join us as we go over the recent developments […]
Semiconductors Selloff After Failed Breakout
Posted by JC Parets on September 15th, 2014 at 12:15 pm
One of my favorite setups are when prices of a given asset make new highs through important resistance that then fail to hold while momentum […]
Tesla Breaks Down From Traditionally Bullish Pennant
Posted by JC Parets on September 15th, 2014 at 10:42 am
Shares of Tesla are down Monday morning after breaking down from what normally is a bullish continuation pattern. This tight consolidation throughout the first half […]
A Multi-Timeframe Look At Mid-Caps
Posted by JC Parets on September 14th, 2014 at 9:16 pm
Normally it’s either the Large-Cap Indexes like the S&P500 and Dow Industrials or the Small-Cap Russell2000 that get all of the attention. But there is […]
Here are 4 of My Favorite Charts in the World
Posted by JC Parets on September 12th, 2014 at 7:18 pm
As we’ve rolled out each of our new packages delivered by Eagle Bay Solutions, I’ve tried to show some examples of what our members receive […]
IBM Likely to Break Higher Out of this Range
Posted by JC Parets on September 12th, 2014 at 11:03 am
Shares of IBM have been a serial underperformer for years. What was once a darling of this bull market in US stocks has now been […]
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) in 2008 and now actively manages money incorporating Technical Analysis and Behavioral Finance into his practice More
- Is JC Penney Setting Up For Another Leg Higher?
- Audio: Q&A on Benzinga Morning Show
- A Look At Energy On Multiple Timeframes
- Yahoo Runs Into Historic Overhead Supply
- Join Me On Benzinga’s PreMarket Prep Show 9/16 9AM ET
- Semiconductors Selloff After Failed Breakout
- Tesla Breaks Down From Traditionally Bullish Pennant
- A Multi-Timeframe Look At Mid-Caps
- Here are 4 of My Favorite Charts in the World
- IBM Likely to Break Higher Out of this Range
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