Shares of JC Penney rose over 3 percent on Monday, after a boutique research firm put out a note suggesting the May sales could come in stronger than expected.
But according to the charts, buying the stock could be penny-wise and pound-foolish.
Auerbach Grayson Global Technical Analyst Richard Ross sees JC Penney as a classically troubled chart that can’t get out of its own way. Even though the stock has risen 35 percent since making a low of $13.55 on April 10th, Ross says that the stock will continue to suffer under the weight of a downtrend that started in February of 2012.
“The stock has some momentum,” Ross said, “but overhead resistance looms large, and I would be a seller into strength.”
And it’s not just the downtrend that points to more bad news ahead. Ross is also troubled by the stock’s 200-day moving average. “The stock has been below the 200-day moving average for over a year,” Ross said. Indeed, while JC Penney shares have managed to touch $19, the 200-day moving average is up above the $20 level, meaning that bearish momentum continues to rule the day.
For this technician, the bottom line is clear. “The trend is your friend,” Ross said. “Sell JC Penney.”