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Two Ways To Play: Macy's Gets a Little Credit


Strengthen your portfolio in good times and bad.

Macy's (M) posted its biggest per-share gain in 17 years today. According to Bloomberg, the move came after the second largest department store in the US was able to renegotiate a bank-credit agreement with JPMorgan Chase (JPM) and Bank of America (BAC).

Macy's credit facility is still at $2 billion, and the maturity date and size of the facility remain unchanged. The facility also is also still untapped, but it gives the company flexibility; investors are now more confident that Macy's will be able pay off its $950 million in debt, which will mature next year.

Of that amount, $350 million is due in April and $600 due in July. Wall Street was previously concerned that Macy's wouldn't be able to meet its obligations as cash flows fell due to dwindling sales.

Macy's shares finished the session up 18%, to $10.01.

From the Bull Pen: Macy's performance today is a prime example of pressing shorts in the retail sector when armageddon seems to be priced in. The stock recapturing its 50 DMA is a healthy sign. A conservative approach would be to wait and allow the markets to digest this move. Bulls can also consider Decker's (DECK); sell stops can be set 2 points from entry.

From the Bear Cave: Bears can consider a downside play in Under Armour (UA). The tape remains skewed to the upside, but one can consider testing the downside if it can reach $30 resistance.
No positions in stocks mentioned.

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