Toy-makers Hasbro (HAS) and Mattel (MAT) saw stellar gains for much of the 2013 market rally, but the going has gotten significantly choppier ever since the May 22 highs in the S&P 500, and again yesterday when Mattel reported its latest earnings.
Second-quarter net income for Mattel slipped 24% to $73.3 million from $96.2 million in the year-ago period. MAT shares got whacked to the tune of nearly 7%.
On the weekly chart, the multiyear stealth rally of Mattel is notable. More importantly, see how the stock accelerated out of its longer-standing trading channel earlier this year. There’s a thing called “mean reversion” — and as it applies to Mattel, it likely means the stock, over time, needs to work back down into this channel to anywhere between $36 and $41.
From a multiyear perspective, Hasbro looks equally concerning — at least in the medium-term. The stock’s late 2012 top was marginally retested at the May highs this year, and that led to a fairly sharp move lower. With yesterday’s earnings news out of Mattel, HAS also dropped in kind, to the tune of 2.4% … and by so doing put in place a lower high vs. its May highs.
So you know, Hasbro is scheduled to report its earnings on July 22 before the bell.
On the closer-up daily chart of Mattel, note that with yesterday’s post-earnings drop, the stock confirmed a meaningful double top and also took out important horizontal support around the $44 mark. From here, next support sits around the 200-day simple moving average, which currently is near $40.70 and also coincides with the upper end of the longer-standing trending channel discussed above.
In summary, while Hasbro still has to report its earnings next week, the signs from both the near- and longer-term charts of these toy-makers point toward continued pressure on shares — at least for the time being.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.
