The fervor surrounding student loans and their potential as the next domino to fall is an ember that continues to slowly burn. Navient (NAVI), the recent spinoff from SLM Corp. "Sallie Mae" (SLM), stands front and center in this credit service group. The impact of rates is felt here, but that isn't the main driver or my focus today. I'm looking at concerns in the current technical picture.
Yesterday was not a particularly good day for NAVI. The stock took a big hit in early March, then spent the month recovering in what looked like a gap fill move. Unfortunately, bulls fell short and traders yesterday reminded us that lows will often be retested when a gap fails to fill.
For the last month, NAVI has been holding support just below $19. We can now change the "has" to "had," because support failed yesterday. The stock did manage to bounce off weaker support at lower levels. The previous support now becomes resistance, so bulls are looking at two resistance lines under $19.50. Not exactly what you want to hear if you are long. One could counter that the low from yesterday and the low from March are two support levels below the stock, but when I weigh how many times NAVI has tested the resistance levels vs. how many times it's tested those support levels, I'm not exactly filled with rainbows and smiles.
There is nothing in the short-term or long-term trends that provides optimism either. Slow stochastics are bearish and the Commodity Channel Index (CCI) is making new lows. This is very bearish when we see the CCI making a new low along with new closing lows in price. I do think we'll see a mid-$17 print this summer based on the daily chart.
There is a little more hope, if you want to call it that, on the weekly chart. The current pattern has not triggered yet for the bears. We have a very wide wedge with a formation all the way back to the first day of trading. The challenge here is the amount of empty space between price and the support level of the wedge. It tends to indicate a very weak, almost spurious, support level. Instead, I would focus more on the shorter time wedge. The support level is about the same anyhow. Below this current $18.50 and we won't find support again until $17.50. There has been very little trading between $17.50 and $18.50, so there is no reason to believe the stock will find some invisible support.
While NAVI is oversold and has bounced before from similar patterns, there is a difference this time. The last two times we saw the Force Index go bullish, the stock bounced. The Force Index looks ready to turn bullish within the next week or two if the stock simply managed to get back to $19. However, those last two times also saw the Relative Strength Index (RSI) move from under 50 to over 50. This time, the RSI is moving lower, rather than higher, as the Force Index has turned higher. This is a change in character that should give any bounce player pause. I don't like changes in character. This contrary move has me looking for further downside rather than a bounce.
Any weekly close over $19.50 and the bulls can breathe a small sigh of relief, as the bearish thesis will be pushed aside, at least temporarily.