The argument forwarded here is that Macy's will be able to combine right-sizing its chain, rigorous cost cuts, with established brands (the Macy's chain also runs the upscale Bloomingdale's chain) to survive the downturn. Wall Street doesn't expect any improvement near-term, forecasting a 6-10% revenue decline for F2010; further, revenue growth in FY2011 will probably be in the modest 1-3% range. The First Call FY2010/FY2011 EPS estimates for M are 95 cents to $1.28.

In normal times, the above sales forecast would spark massive institutional investor selling. However, in today's 'frugal consumer' era, expectations for the retail sector have been lowered: it's not so much your same store sales gain as 'will you have a viable business model and dependable cash flow after closing X-number of stores?' In short, survival is the key amid the consumption drought, Macy's will be a survivor, and that's one major reason investors have bid-up Macy's shares this year.

Technically, Macy's stock will encounter psychological resistance at $20, then more resistance in the $22-25 range, but with a P/E of 15, the shares are not overpriced. Hence, a Buy of M is favored here, or on a pull-back.

Also, the Sell/Stop Loss has been raised to $12 from $4, or to just above the June entry point.

Stock Analysis: Macy's is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in M now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your M position before December 2009. Sell/Stop Loss if you bought shares in this company: $12.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.