J.C. Penny Hammered on Wide Earnings Miss

J.C. Penny JCP was hammered after releasing a worse than expected quarterly earnings report.  Earnings showed a loss of $163 million or $0.75 a share. On a non-GAAP basis the company lost $55 million or $0.25 per share. Comparable store sales for the first quarter declined 18.9% and total sales decreased 20.1%. Internet sales decreased in the quarter by 27.9% from the previous year. The company also announced that it would discontinue the $0.20 per share quarterly dividend since it will result in $175 million cash saving.

Price action was negative on the opening bell.  Shares plunged nearly 19%, but finished off their lows.  The range of trading was more than 10%, which reflects the difference of a nervous market.  Resistance is now seen near today's highs at $30 per share.  Additional resistance is seen near former support which was the 200-day moving average at $32.90.  Support on the retailer is seen near the weekly lows made during September and October of 2011 near $24.  A break of this level would lead to a test of $20.

The RSI (relative strength index) plunged to below the 23 level, which is a function of heavy downward momentum.  The RSI briefly dipped below the oversold level in April but only bounced slightly.  The MACD (moving average convergence divergence index) was consolidating near the zero index level prior to Wednesday's price action. 

The MACD created a sell signal where the spread (12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread.  The index moved to -.53, which is likely to lead to additional negative momentum.  Volume on JCP surged above the 50 and 100 day moving averages of volume, confirming the breakdown.