FS Investment Now Rated 'Hold' But It Could Do Better

 | Jan 12, 2018 | 2:20 PM EST
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FS Investment Corp. (FSIC) was downgraded by TheStreet's quantitative service today. The downgrade was to "HOLD". According to a company statement, FS Investment is a "business development company focused on providing customized credit solutions to private middle market U.S. companies." FSIC has been in a downtrend the past year but with this quantitative downgrade let's see what the risk/reward profile looks like from the charts and indicators.

In this daily bar chart of FSIC, below, we can see the pattern of lower lows and lower highs since February. Prices have tested the declining 50-day moving average line a number of times but we have failed to see sustained strength above the line. The 200-day moving average line has been weakening since May. Check the volume of trading - very heavy in December - and this might indicate a shift in ownership.

The daily On-Balance-Volume (OBV) line has been weak since March but shows some slight stability this month. In the lower panel is the 12-day momentum study which shows equal lows in October and December when prices made lower lows. This is a bullish divergence and may foreshadow a period of sideways trading for FSIC.

In this weekly bar chart of FSIC, below, we can see that prices are below the declining 40-week moving average line. Weekly volume shows a spike up towards 15 million shares. The weekly OBV line is weak and signals months of aggressive selling and liquidation. The Moving Average Convergence Divergence (MACD) oscillator looks like it could turn higher for a cover shorts buy signal.

In this Point and Figure chart of FSIC, below, we can see the downtrend but also that a trade up to $7.83 will be a triple top breakout.

Bottom line: FSIC was downgraded to a "HOLD" by our quantitative service. A downgrade probably seems bearish but in this instance I would take "HOLD" at its word. After reviewing the charts and indicators of FSIC I would indeed like to hold it.

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