The analyst community appears to be getting a little nervous as we’re seeing a little pick-up in the number of downgrades over the last few weeks. It appears that some of the analysts are following the “buy low/sell high” rule, but are they?
Today’s three big stock charts look at the technical pictures of Nike Inc (NYSE:NKE), Sprint Corp (NYSE:S) and Cree, Inc. (NASDAQ:CREE). All three of these companies were downgraded this morning, but should you be selling based on the news? We’ll let the charts answer that.
Nike Inc (NKE)
For more than a year, Nike and other active wear companies have been lagging the market as consumers are finding their shoes and apparel in other brands. This morning, Goldman Sachs downgraded the shares from a buy to a hold, but the chart says you shouldn’t be holding this stock — you should away.
- The downgrade of NKE shares comes after the stock has been trading in a long-term bear market for more than three months when the stock broke below its 20-month moving average again in August.
- Despite the strength that Nike stock saw in the summer, the technicals just signaled a “Death Cross” as the stock’s 50-day moving average crossed below the 200-day moving average. The last time this happened was May 2016 when the stock was setting a course from $60 to $50.
- The $51-price-point has been a chart support level being defended by the technical traders. This morning, NKE stock is seeing support at this price but a break lower will accelerate the selling pressure.
Sprint Corp (S)
Verizon Communications Inc. (NYSE:VZ) came out with better than expected earnings this morning and the other cell phone providers are weak on the news.
Sprint shares got a downgrade this morning as the news hit the wire, but the charts told you that this stock was a sell a few months ago if you were watching.
- S stock’s 50-day moving average transitioned into a bearish pattern in the beginning of September after the stock spent more than three months consolidating. This put Sprint stock in intermediate-term bearish mode.
- S stock has been trying to consolidate above the round numbered support provided by $7. This morning, the stock is opening below this price, indicating that we’re likely to see technical traders increase their selling.
- In moving below $7, Sprint shares slipped into a long-term bear market trend as the stock is now trading below its 20-month moving average. Expect to see S trade to $6 before finding significant support.
Cree, Inc. (CREE)
After jumping more than 10% on a positive earnings report yesterday, CREE shares dropped as Williams Capital downgraded it from a hold to a sell.
The move is likely to lock-in a profit on the semiconductor company, but it looks like there’s upside potential for the company if you read the chart.
- Cree shares slashed through their top Bollinger Band yesterday as it shot 10% higher. The stock is seeing some profit-taking this morning; however, the volatility rally is likely to carry the stock higher.
- CREE’s outlook switched from Neutral to Bullish in early October as the 50-day moving average shifted into an ascending pattern. This targeted a price move to $30 by our technical models. The sudden spike is likely to send the stock parabolic.
- Just two days ago, the 50-day moving average crossed above the 200-day. This forms a Golden Cross pattern, which is bullish for the stock and targets higher prices over the next four to six months. The bottom line is that Cree shares have room to move higher after the profit takers get out of the way.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.