JC Penney Company Inc (NYSE: JCP)

J. C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., sells merchandise through department stores in the United States. The company sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products, and home furnishings, as well as provides various services, including styling salon, optical, portrait photography, and custom decorating.

Take a look at the 1-year chart of Penney’s (NYSE: JCP) with the added notations:

1-year chart of Penney's (NYSE: JCP)

After trading mostly sideways from March through July, JCP took off to new highs. Unfortunately, the stock fell off a cliff after that. You will notice that since March the stock has found support at $7 (blue) whenever that level has been approached. Now the stock is almost there again. Traders should be able to expect some sort of bounce, but if not, new lows for the year will follow.

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The Tale of the Tape: JCP has a key level of support at $7. A trader could enter a long position at $7 with a stop placed under the level. If the stock were to break below the support a short position could be entered instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach