Downgrade, Charts in Agreement on SunCoke Energy

 | Aug 07, 2017 | 1:10 PM EDT
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SunCoke Energy (SXC) was downgraded today by TheStreet's quantitative service. Naturally, I took a look at the charts to see if these two approaches were on the same page, so to speak.

SunCoke Energy is not a household name, but it looks like it trades enough on a daily basis that it should have good liquidity. Let's start our analysis with this daily chart below.

In this daily bar chart of SXC, above, we can see a sideways trading range the past 12 months, but the May-July rally did not last long and has retraced more than two-thirds of its climb. I consider it a sign of weakness when a stock like SXC breaks out over its February to April highs and then quickly retraces the bulk of the rally. I don't mind shallow pullbacks or corrections, but when a stock corrects too much it is a sign for me that investors are not anxious to buy.

Prices are below the cresting 50-day and 200-day moving averages. The daily On-Balance-Volume (OBV) line has been weakening since December and suggests that sellers are more aggressive even on rallies. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line for an outright sell signal.

In this weekly bar chart of SXC, above, we can see prices are below the flattening 40-week moving average line. The weekly OBV line has been neutral since December and the MACD oscillator is just slightly above the zero line.

In this Point and Figure chart of SXC, above, we can see the down move since July (the 7 on the chart). There is some potential support below the market in the $8.20-$7.80 area.

Bottom line: While there is some support below the market, a weak close below $8 is possible and it is likely to precipitate further declines -- the charts and the quantitative approach working together.

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