I'm not a big fan of pegging bearish charts on big gap-down days, but there are times when one will at least give me pause. This morning, Verizon (VZ) announced it was buying AOL (AOL), which I believe could have a long-term effect on streaming and cable. As such, I believe we may see short-term pressure on Cablevision Systems (CVC), which has said it is looking to do a deal, so that makes a longer-term bearish argument a bit more difficult because there is no clarity in what that deal would be. It seems as if CVC would like to be an acquirer, but I wonder if the deal this morning changes the landscape for communications companies.
CVC saw a nice pop earlier this month on the consolidation chatter along with strong earnings; however, the stock has failed to capitalize on that initial move. Instead, we've seen a rising wedge pattern form above recent resistance. This pattern failed to hold yesterday and broke lower in a bearish fashion, reinforced by additional follow-through this morning. The slow stochastics were the first hint, breaking lower in front of price, and now we have the vortex indicator joining it on the bearish side. Trend, speed and price are now all pointed bearish and we are just waiting for momentum, shown by the RSI, to join them. This one is stubborn, though, and holding a trendline as well as the midline.
Bulls can get in the game with a simple rally and close above $20.25 today or tomorrow. Without such a rally, I would look for the $18.75 to $19 area to be tested. Furthermore, without some company-specific news, this looks like it is setting up to be a short-term underperformer in the cable and communication space. Actually, CVC, Dish Network (DISH), Charter Communications (CHTR) and Liberty Global (LBTYK) all look ugly. I have no interest in touching them. There are better places for your eyes, and for your money.