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Investors Might Get a Bargain on J.C. Penney


The stock has formed a bottoming pattern, and it looks like it wants to head higher.

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J.C. Penney (NYSE:JCP) has formed a textbook bottom. The stock was left for dead after former CEO Ron Johnson was shown the door last year.

Ron Johnson's Plan
For the record, I think Johnson's plan of remaking J.C. Penney into a leader of fashion and style could have worked, but the execution was awful. Instead of going nationwide all at once with an untested strategy, he should have tried it regionally and then expanded after the inevitable kinks were ironed out. What really surprised me was his hubris. He took the job and became one of the highest-paid CEOs, then decided to work from home, which is in a different time zone. But I digress. Let's get back to the stock.
Customers Want Bargains: Shocker, I Know
The best thing that the company's board did was cut the company's losses, just like one does in trading, and bring back their old CEO, Myron Ullman. Ullman stepped in and saved the company from going under. He restored faith, worked deals to keep the company solvent, and gave J.C. Penney's core customers what they wanted: SALES.
A New Bottom Forms
During that process, the stock fell to a record low and then traced out a large bottoming pattern. Investors know that if the company was going to go bankrupt, it probably already would have. The stock broke out of a long downward trend line and then jumped above the neckline of its head-and-shoulders bottom pattern this week. As long as it stays above the $9 area, the stock looks like it wants to rally. Additionally, its 50-day moving average line is on track to break above its longer-term 200 DMA line in the near future, which will be another bullish event know as a golden cross. If this stock is indeed bottoming, shoppers might not be the only ones getting a bargain.

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Position in JCP
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