Cable company Charter Communications finally made it back into the green zone of the SIA S&P 100 Index Report in July after spending over 18 months in the red zone. Its favored run didnât last long, however. On Friday, after the companyâs quarterly results fell short of expectations on the sales side, CHTR dropped 9.6% to cap off a 14.1% decline for the week. The shares plunged 22 spots on the day in the relative strength rankings to 35th place, exiting the green zone and dropping into the Yellow Neutral Zone.
Even after this selloff, Charter remains more highly ranked than Comcast (CMCSA, 49th place), its closest comparable company in the SIA S&P 100 Index Report. The second closest comparable is streamer Netflix (NFLX), which is in the Green Favored Zone. A major breakdown is underway in Charter Communications (CHTR) shares. A summer recovery rally lost momentum into September with resistance emerging near $450.00 but into October, the trend has turned decisively downward. Over the last ten days, CHTR has dropped off a cliff, completing a bearish Rising Wedge pattern, multiple breakaway gaps downward, taken out both its 50 and 200-day moving average and on Friday, a bearish Shooting Star on a big spike in volume, a sign of increasing selling pressure.
Next potential downside support on trend appears near the $350.00 round number, then the $320.00 to $340.00 area based on previous support/resistance. Initial resistance on a rebound appears at the 200-day average near $385, then the $400.00 round number.
A summer breakout rally in Charter Communications (CHTR) shares ran out of gas near $450.00, topping out at a lower high in September. This month, distribution appears to have resumed with the shares staging a bearish Double Bottom breakdown that has extended into a bearish Low Pole.
A potentially significant support test is now underway with the shares having corrected back toward $375.00, a level which has been both support and resistance since 2020. A close below $368.00 would confirm that a deeper decline is underway with next potential support in the $314.05 to $300.00 range, a zone where a round number, horizontal count and previous column lows cluster.
A successful initial support test, however, and the start of a trading bounce would be signaled by a close above $406.25 initial resistance, which would complete a 3-box reversal.
With its SMAX score falling to 6, CHTR is still exhibiting strength against the asset classes, but that could change to weakness if the score falls any further.
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