CoreCivic, Inc. (CXW) adopted its current name is ambiguous in 2016, the abandonment of the former Corrections Corporation of America. The name change marked an unveiled attempt to deflect attention away from its main activity, as the largest prison-for-profit company in the united States. It is clear that people are now aware of the true identity, because the stock sold on the heavy volume in the same time, the George Floyd protests erupted earlier this month.
The company the company has avoided the lion’s share of the outrage up to this point, but the indignation of the reform of the police is likely to develop naturally in the criminal justice system. The united States holds a higher percentage of its citizens in prison – 655 per 100 000 inhabitants than any other civilized country, including China. As a result, true reform could signal the permanent demise of this dubious industry.
The stock is not perfectly placed for short sales, but that could change soon, as it has now changed to 200-day exponential moving average (EMA) resistance after a rebound off a 16-year low, which has hampered the deep lows of 2009 by less than two points. A retracement to the moving average or the completion of an 11-year-old distribution would both trigger the major sell signals, may be the continuation of the long, slow crawl toward oblivion that began in 2017.
CXW Long-Term Chart (1997 – 2020)
The creation of the public company in the mid – $90 in July 1997, and is entered in a bullish trend regular, who posted a record high of nearly $150 at the end of the year. Aggressive bears then took control, generating a steep slope of the downward trend that carved an all-time low of 63 cents, exactly three years later. A good recovery by the middle of the decade booked modest gains, rising to $33.40 in the summer of 2007, before a sharp decline during the economic collapse of 2008.
The stock displayed more low in the single digits, in March 2009, and turned again, making a round-trip in state-of-the-high 2012. Immediately escape has failed to attract the interest of buyers, adding just eight points in 2013. The price action and then carved a double top at this level, to break during the “mini-flash crash” in August 2015. It is not surprising, the decline ended after the presidential election, which gives a V-shaped pattern that has won the 2007 peak in 2017.
A slow backwards movement finally reached the 2016 low in March 2020, triggering an instant breakdown at a low level in 16 years, followed by a period of five-point bounce in the beginning of June, when Floyd’s death has sent shock waves across the world. The stock has given more than half of the bounce this month, but is still holding above the lows of 2009 to $9.50. There is little or no support below this level, increasing the potential for profitable long-term to short sales.
The monthly stochastic oscillator dumped in the level of oversold in March, the publication of the most extreme reading in 20 years. A bullish April crossover did not stir buying interest, increasing the probability that the signal will fail. However, the position of strength could sustain a final bounce back in the lower part of the 2016 low-between $13 and$ 14, which was closely aligned with the 200 days EMA resistance.
CXW Short-Term Chart (2016 – 2020)
The balance volume (OBV), the accumulation-distribution indicator posted a multi-year low in November 2016, and turned in a modest accumulation phase, which topped out in August 2018. Slow but steady degradation since that time, has reached a three-year low just above the deepest part of the dip. Look for OBV to lower this level at the same time as a failure, adding fuel to the bearish cause.
A breakdown of the $9.50 would be the target of the 2001 low at 63 cents, because it marks the long-term 100% retracement. Keep in mind that this is a relatively slow mover, so that the decrease of the target could take years to achieve, or not at all. Realistically, the stock will not reach this level, without fear of the bankruptcy of the conduct of price action, but a lot of people will not mind if this type of business is thrown on the dump to the dustbin of history.
The Bottom Line
America is the largest prison in the company is the sale in response to George Floyd events, with reforms aimed at strengthening the potential of a decline in stock prices.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.