You would think that the announcement of the closing more Toys R Us stores would be bearish for a company like Mattel Inc. (MAT) . Right?
What should you think about the price action of a stock that does not decline on what appears to be bearish news? I try to teach my college students that this is an example of the marketplace being a discounting mechanism. Stocks are forward looking so if a stock does not decline on what appears to be bearish news the stock (and its investors) are looking ahead to something else.
Let's take a look at charts and indicators of Mattel today. Maybe it will be games and fun?
In this daily bar chart of MAT, below, we can see that the price was going down until November. Prices gapped higher and then traded sideways. MAT is now trading between the flat 50-day moving average line and the nearby, but still-declining 200-day average line.
The daily On-Balance-Volume (OBV) line declined until November and has since moved sideways indicating a balance between buyers and sellers. The Moving Average Convergence Divergence (MACD) oscillator gave cover shorts buy signals in November and December and it is now above the zero line in bullish territory.
In this weekly bar chart of MAT, below, we can see that prices are testing the underside of the declining 40-week moving average line. The weekly OBV line turned slightly higher from its November low. The weekly MACD oscillator gave a cover shorts signal in November and is heading back to the zero line.
In this Point and Figure chart of MAT, below, we can see that prices are in a large equilateral pattern with a potential upside price target of close to $20.
Bottom line: Is all the bad news out on MAT? Maybe, but aggressive traders could consider going long MAT on a close above $18 or a close above $19. Risk below $15. My first target is $22.