J.C. Penney Stock Back to 2001 Lows: Next Stop $9.00

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Shares of J.C. Penney Co. Inc. (JCP) closed at $12.80 last night, after setting a new 52-week low of $12.50 during the day. Its shares have not traded at that price since January 2001.

Options traders on Tuesday bought puts at $13.50 before the shares closed at $13.28 Tuesday night. Some $15 puts were presumably rolled over at an even lower price. CNBC reported yesterday that a big options trade for 10,000 September 10th puts makes money if J.C. Penney’s stock falls below $9.41. Another big trade bet that the stock will hold above $12 a share for the next 10 days. Who is right?

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History -- and technical analysis -- would indicate that once a stock that has been falling for nearly two years breaks through a multiyear low, that stock will continue downward until it finds its next floor. For J.C. Penney, that level is below $10 a share, in the neighborhood of $7 a share. That is really ugly for a stock that traded above $42 only 18 months ago.

Nothing seems to be able to stop the fall. The company fired its CEO, both Bill Ackman and George Soros have pumped money in and a new chief marketing officer was named -- nothing seems to help.

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Some 18.5% of the company’s shares were held short as of July 24, when the shares closed just under $16. The shorts are highly likely to be higher when short interest is reported again after markets close tomorrow night.

J.C. Penney shares are trading down 0.6% this morning, at $12.72 in a 52-week range of $12.50 to $32.55.

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