This Stock Sucks...

I hope you don't own this stock.  It has been called the 'Titanic of the Retail Sector'.  This is really a shame because Sears is more that just a once great retailer...it is part of American History.  If you lived in the Rural Midwest in the late 1800s or early 1900s you relied on the Sears Mail Order Catalogue for pretty much anything that you could not produce yourself.  Sears sold everything from tractors, to guitars, to opium, to glassware, to books, and so on and so on.  Some historians have said it wasn't a luxury...it was an essential item for settlers in the Rural Midwest because it provided many items that could simply not be gotten elsewhere.     

And of course there is the Sears Tower, which was the tallest building in the world for 25 years and the symbol of the companies success.  At the time the Sears Tower was planned in 1969, Sears was the largest store in the world with about 350,000 employees.

But then in 2005 the Wall Street 'experts' came in and took it over and decided to 're-think' it and 'act-differently'.  They decided to do things such as not keep the stores clean because it was a waste of money, spin of valuable real estate holdings, and gut the balance sheet with an irrational amount of buy backs.  Here is what happened:

http://www.fool.com/investing/general/2015/05/20/why-sears-so-investors-should-lovehate-eddie-lampe.aspx

Of course, it is no surprise that the stock is collapsing.  Early in 2015 it was trading in the 40s.  Yesterday's close was $8.29.

 

Is there a way to make money here?  There probably is.  The reason why many investors or traders lose money is because they always try to catch the exact bottom of a stock that is falling, like SHLD is here.  This is the wrong way to do it.  The correct way is to buy it after it has made its low trade and then is back on the way up...if in fact it does go back up.  This can be seen on the chart as a break in the downtrend line that I have drawn here.  Yeah...I know that you wont catch the bottom but the risk reward dynamics are much better if you use this strategy as opposed to jumping in blindly.  That's just guessing.  If the stock doesn't rebound you will feel like a fool...but maybe it could help you get a job working in the Sears Corporate Office.

If a trade is entered, make sure you have a logical stop-loss strategy.  I wouldn't buy it until the close and then my initial stop-out would be at the price that was the low trade of that day.  Then I would use a trailing stop if it does rally.  My target would be $11 because that level was support in October and November, so it should be resistance again if it gets back there.