CoreCivic Inc. (CXW) was downgraded to hold by TheStreet's quantitative service today. A downgrade is the right direction, but holding may be risky. CXW is a publicly-traded real estate investment trust (REIT), and the nation's largest owner of partnership correctional, detention and residential re-entry facilities. Let's check out the charts and indicators.
In this daily bar chart of CXW, below, we can see some interesting patterns. From the middle of March to the middle of June prices rise, but on shrinking volume, and this might be considered a rising wedge pattern.
What makes me believe this is a rising wedge is the price reaction from late June to now -- prices swiftly retract most, if not all, of the pattern. This is typical of rising wedges. Notice that prices are now below the declining 50-day moving average line and the bearish 200-day line.
The On-Balance-Volume (OBV) line was in a decline from August and that decline accelerated from the middle of June. The Moving Average Convergence Divergence (MACD) oscillator is bearish with no signs of a reversal yet.
In this weekly bar chart of CXW, below, we went back four years to get a better feeling for support and the longer trend. Prices have been in a lengthy decline and are poised to make a new low for the move down.
There is some old potential chart support in the $14-$13 area, but I would not count on it very much. The 40-week moving average line has been in a decline for months. The weekly OBV line is weakening and the MACD oscillator is giving a new sell signal.
In this Point and Figure chart of CXW, below, we can see that the software is projecting a downside price target of $12.
Bottom line strategy: CXW is vulnerable to further declines. Avoid.
