SuperValu (SVU) was downgraded by TheStreet's quantitative service today. We last looked at SVU in early May and looked for an upside play: "If you don't mind dealing with a stock below $5, I would look at SVU. You could buy it here and risk below $3.75 or buy it on a close above $4.50 and then risk a close below $4.00."
A 7-for-1 reverse split changed the charts but the bounce play may have worked for a short time. In June, the price of SVU slumped to new lows. Prices have continued to trend lower and lower. With today's quantitative downgrade, we can set our sights still lower.
In this daily bar chart of SVU, below, we can see prices are below the declining 50-day moving average line and the declining 200-day moving average line. Volume has been heavy recently and the On-Balance-Volume (OBV) line has resumed its decline. The momentum study is making a low lower than the August low, so there is no bullish divergence to get our hopes up.
In this 10-year weekly bar chart of SVU, below, we can see prices are retesting the lows of 2012.
In this Point and Figure chart of SVU, below, we can see the long decline and a downside price target around $11.
Bottom line: Reverse splits typically do not happen when the stock is strong. Quantitative downgrades typically do not happen when a stock is strong. SVU is probably declining further, maybe to $11.
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This column originally appeared at 2:35 p.m. ET today on Real Money, our premium site for active traders. Click here to get great columns like this from Bruce Kamich, Jim Cramer and other writers even earlier in the trading day.
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