Beaten-down Macy's needs to drop another 20 percent before it's a buy, trader says

One major S&P 500 stock has been shut out of the market's rebound.

While the S&P 500 has rocketed 16 percent off its Christmas Eve closing low, Macy's has tumbled 10 percent. Losses accelerated in January after the department store chain cut its full-year estimates.

One technician sees firm support beneath Macy's, but it will have to fall a lot more before it finds it.

"There is massive support with the trend line dating back all the way to the end of 2008, that comes in around $20," said Bill Baruch, president of Blue Line Futures, on CNBC's "Trading Nation" on Wednesday. "There's your buy area."

Macy's would have to fall around 21 percent from Thursday's levels to reach $20. The retailer last traded beneath that level in late 2017.

If Macy's was to rally from here, Baruch said it has several key levels it will struggle to cross.

"It has a thick wall of resistance," he said. "The 50-day moving average, this is the first one, up there around $28 and then you've got the 100 and the 200. On top of that, you've got the gap close from Jan. 9 right below $32."

"If you're long this thing, you want to be selling and taking money off the table into that rally. But ultimately again, looking back on a longer-term basis, you have that nice trend line, that's going to be a buy area," Baruch added.

Stacey Gilbert, head of derivative strategy at Susquehanna, said market activity suggests investors are cautiously wading back into the stock.

"In general, we do see investors thinking that this could be an opportunity to at least buy some calls here," Gilbert said Wednesday on "Trading Nation." "When you buy a call, you have that embedded protection that if the stock goes down lower, you are not forced to buy it."

However, most are playing wait and see until the company's outlook is clearer.

"One thing that it looks like investors are most focused on right now, it's earnings in the next couple of weeks," added Gilbert. "The implied move right now is around, let's call it, 8 to 9 percent."

Macy's is set to report earnings on Feb. 26. An 8 percent move would add or take off around $2 from its share price on Thursday.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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