Bunge's Quant Downgrade Accentuates How Weak the Stock Really Is

 | Oct 12, 2017 | 2:28 PM EDT
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Bunge Ltd. (BG) was downgraded by TheStreet's Quant Ratings service Wednesday. I took a look at the charts and indicators on BG this afternoon and I can second the downgrade with a triple-top on the weekly chart (second chart below).

Let's check out the charts and indicators of BG now and see how much of a selloff we could be in for.

In this daily bar chart of BG, below, we can see that prices have been declining since late May. Prices are trading below the declining 50-day moving average line and the 200-day moving average line, which has also turned lower. In late September the 50-day line moved below the slower 200-day line for a bearish dead cross. 

The On-Balance-Volume (OBV) line has been declining since late May with more volume being traded on down days. The trend-following Moving Average Convergence Divergence (MACD) oscillator has spent much of the past five months below the zero line telling us that the trend has been negative. BG found support in the $68-$66 area a number of times before (May and Jan./Feb.), but this time around prices may not hold.

In this weekly bar chart of BG, below, we can see that prices are below the declining 40-week moving average line. The chart shows three peaks in the past year in the $80-$85 area. This possible triple-top formation could produce a still deeper decline in the months ahead. The weekly OBV line is pointed down and the weekly MACD oscillator just crossed below the zero line for an outright sell signal.

In this Point and Figure chart of BG, below, we can see the extreme lows at $66.08 on this kind of chart. A break of these lows, or if you will a break of support, will likely precipitate further declines.

Bottom line: BG could bounce in the short-run but the bigger picture and the quantitative downgrade suggest lower prices in the weeks and months ahead.

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