Stock Pick: Nordstrom Incorporated

Nordstrom Incorporated (JWN) is a fashion retailer that sells clothes, shoes, and accessories to men, women in children. The firm that started as a small shoe shop in Seattle back in 1901 has grown into a large publicly traded company with 373 stores in 40 states and in Canada. In 2017, Nordstrom achieved records sales of over $15 billion. The company continues to grow even in the midst of a retail apocalypse in the US.

Technical Analysis of Nordstrom Incorporated (JWN)

JWN started to show signs of weakness in July 2015 when it generated a lower high of 80.23. This was a clear signal that the bull run that started in August 2010 was over. The downtrend was confirmed in September 2015 when the stock breached support of 68 and broke out of a rounding top pattern.

As as result, JWN plunged to as low as 35.01 in June 2016. Since then, the stock has been showing signs of bullishness. It took JWN over two years of consolidation before it finally reversed its trend.

Technical analysis show JWN broke out of a large inverse head and shoulders pattern on the weekly chart. This happened when the stock breached resistance of 58 earlier this month. The breakout was validated by the highest weekly volume recorded by JWN this year.  

However, the weekly RSI is showing overbought signals. The stock must pull back to keep the ascent sustainable. This can be your opportunity to buy the dip.

Fundamental Analysis of Nordstrom Incorporated (JWN)

On top of the technical analysis, fundamentals offer some support to our bullish outlook. JWN’s trailing twelve months (TTM) price to earnings ratio (PE ratio) is 20.25. The stock appears fairly valued. However, it has a five-year maximum of 33.24. This tells us that investors are willing to pay a premium for JWN shares.

In addition, Zacks reports that Nordstrom’s second quarter results beat expert estimates. Analysts forecasted that the company would generate revenues of $3.79 billion and a profit of 83 cents per share. However, Nordstrom posted revenues of $4.07 billion and an earnings per share of 95 cents.

The strategy is to buy on dips as close to 58 as possible. If bulls can successfully back test the breakout, then we might see JWN ascend to 80.

The timeline for the target is six months.

Weekly JWN Chart

Monthly JWN Chart

As of this writing, the Nordstrom Incorporated stock (JWN) is trading at 61.56.

Summary of Strategy

Buy: As close to 58 as possible.

Target: 80

Stop: Close below 55.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.