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What: Shares of J.C. Penney (NYSE:JCP) were taking a hit again today, falling as much as 11% before finishing down 8% after a hedge fund sold its stake in the retailer and Wells Fargo issued a negative note on the company.

So what: In an ominous research note, Wells Fargo said, "We believe J.C. Penney has been burned by the effects of an unsuccessful turnaround strategy, which has created a hole that is likely too deep." This comes after the retailer posted an impressive comparable sales clip of 10.1% for November, but Wells seemed to believe that comps may have peaked for the quarter, and that they were largely driven by deep markdowns, meaning that margins are likely to suffer. Separately, Hayman Capital Management sold 11.4 million shares, or 5.2% of the outstanding stock, it had owned.

Now what: While J.C. Penney's 10% comp for November may look impressive, analysts observed that same-store sales had fallen 32% in its fourth quarter last year, and the November comp was the easiest to beat as Hurricane Sandy had affected sales last year and the company was open longer on Thanksgiving this year. Notably, it did not release traffic data in its November update so we don't know if more customers were visiting its stores, which it needs. Though sales may be moving in the right direction now, Penney is still on track to post a huge loss for the fourth quarter as analysts project a shortfall of $0.66. Combine that with a near-$5 billion debt burden, and it's easy to see why Wells Fargo thinks this hole may be "too deep."

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