Silvergate Capital Corporation (SI) is cutting headcount by 40% and taking a $196 million impairment charge, after making its name as one of a few traditional banks providing deposit, fund transfer, security and other services for the cryptocurrency trading market.
Let's check out the charts.
In this daily bar chart of SI, below, I can see a downward trend in force from early April. Today's gap lower to a new 52-week low keeps the bears in control. Trading volume has been heavy the past two months, but the On-Balance-Volume (OBV) remains pointed lower telling us that sellers of SI are being more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is bearish. The slopes of both the 50-day and the 200-day moving averages are negative (bearish).
In this weekly Japanese candlestick chart of SI, below, we can see the past three years of price action -- a rally, a top formation and a decline. Prices are back to a level where nearly everyone who went long SI in the past three years is at a loss. This is a structurally weak condition. Prices are extended below the declining 40-week moving average line. The weekly OBV line has plunged lower the past year or so. The MACD oscillator is bearish.
In this daily Point and Figure chart of SI, below, the software shows us a downside price target of only $1.60. Don't shoot the messenger.
In this second Point and Figure chart of SI, below, I used weekly price data and a five box reversal filter. In this case the software is projecting a price target of $0.00 - zero. Again, don't shoot the messenger.
Bottom line strategy: Unfortunately the technical outlook for shares of SI are bearish. Avoid the long side.
