TheStreet's Quant Ratings service downgraded SunCoke Energy (SXC - Get Report) to a "D+ Sell" on Monday from a previous "C- Hold." Naturally, I took a look at the charts to see if technical analysis on the stock is on the same page -- and it is.
Now, SunCoke isn't a household name, but it trades enough on a daily basis to offer good liquidity. Let's start our analysis with this daily chart below:
We can see a sideways trading range over the past 12 months. The stock's May-to-July rally didn't hold up long, and SunCoke has since retraced more than two-thirds of that climb.
I consider it a sign of weakness that SXC broke out over its February-to-April highs, but quickly retraced the bulk of the rally. I don't mind shallow pullbacks or corrections -- but when a stock corrects too much, that's a sign that investors aren't anxious to buy.
SunCoke's price has also fallen below not only the stock's cresting 50-day moving average (the gold line in the uppermost chart above), but under its 200-day moving average (the blue line) as well. The daily On-Balance-Volume line (OBV) has likewise been weakening since December, suggesting that sellers are more aggressive even on rallies. Lastly, the Moving Average Convergence Divergence oscillator (MACD) has dropped below the zero line for an outright "Sell" signal.
Now let's look at SunCoke's weekly bar chart:
We can see that SXC has fallen below its flattening 40-week moving-average line (the gold line in the uppermost chart above). Additionally, the stock's weekly OBV line has been neutral since December, while the MACD oscillator is just slightly above the zero line.
And lastly, let's check out SunCoke's point-and-figure chart:
We can see a down move for the stock since July (denoted with a red "7" on the chart above.). However, there's some potential support below the market in the $7.80-to-8.20 area. (SunCoke is trading at $8.42 as I write this, down 1.4% for the session.)
The bottom line: While there's some support for SunCoke below the market, a weak close below $8 is possible -- and likely to precipitate further declines. So, this is a case where quantitative and technical analysis agree.
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(This column originally appeared at 1:10 p.m. ET Aug. 7 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.)