Charter Communications Inc. (CHTR) was downgraded today by TheStreet's Quant Ratings service. Regular readers of Kamich's Korner on Real Money know that I look at TheStreet's quantitative service to alert me to stocks that are moving or about to move (even better!).
A combination of some weaker charts, technical indicators, and a quant downgrade could mean the beginning of an important reversal for CHTR. Let's check further.
In this daily bar chart of CHTR, below, we can see that a small upside gap from late July has been filled. This gap may have been an exhaustion gap as it came late in the uptrend for CHTR. Prices have declined in September to close below the still rising 50-day moving average line.
The On-Balance-Volume (OBV) line on the daily bar chart has turned lower from a peak in early August. A weakening OBV line happens when the volume of shares traded on a series of down day is heavier than on the up days. A weak OBV line suggests that sellers have been more aggressive and they are anxious to get out. The Moving Average Convergence Divergence (MACD) oscillator crossed to the downside in August for a take profits sell signal and could move below the zero line soon for an outright sell signal.
In this weekly bar chart of CHTR, bwlow, we can see that prices are still above the rising 40-week moving average line. The $340-$330 area looks to be good nearby support. The weekly OBV line has stalled in the past six weeks and the MACD oscillator is crossing to the downside for a take profits sell signal.
In this Point and Figure chart of CHTR, below, we can see a strong uptrend with a number of consolidation patterns along the way. CHTR is in a down move (Column of "O's") with both a lower downside price target and support in the $340 area.
Bottom line: The price of CHTR has rolled over the past six weeks. Weakness is visible in the indicators and the quantitative downgrade would deter me from the long side. CHTR is likely to weaken further to retest support in the $345-$330 area. Investors need to watch the 200-day moving average line just above $330 as a break of that indicator could mean that CHTR has further to fall.
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