Charter Communications Is A Buy The Dip Opportunity (Technical Analysis)

seekingalpha10-29

Charter Communications presents a buy-the-dip opportunity, trading above its 30-week EMA and showing long-term bullish momentum despite short-term bearish momentum.The stock has pulled back 50% from ...

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use a stop loss at $310 to manage risk.Consider buying a smaller stake before earnings and adding more if the report is favorable to mitigate potential downside risk.   imaginima Charter Communications (NASDAQ:CHTR) is a buy-the-dip opportunity. CHTR is a member of the Communications Services sector, and it operates in the Cable and Satellite industry. In this article, I will outline my buy-the-dip thesis using technical analysis. I will focus on price action, momentum, volume, and relative strength. I will also identify a stop loss in case my thesis proves incorrect. Let’s look at the weekly chart. Chart 1 – CHTR Weekly with Momentum, Volume, and Relative Strength www.stockcharts.com When thinking of stocks to buy, I start with an examination of the weekly price action. I like the weekly timeframe as it filters out the day-to-day noise and it allows me to take a long-term perspective. I couple the weekly price action with the 30-week exponential moving average [EMA] to help me decipher the trending aspects of the stock. In short, I want to buy stocks that are trending higher and that are trading above an upward sloping 30-week EMA. In my experience, holding a stock that is above an upward sloping 30-week EMA allows me to participate in an upward trending stock. Conversely, I stay away from stocks that are trending lower and that are trading below a downward sloping 30-week EMA. Using this simple rule keeps me out of trouble. It doesn’t work all of the time, but it works often enough for me. CHTR has performed well since its bottom in April 2024. At that time, it traded as low as $236.08. From there, CHTR rallied to a high of $386.28 after its earnings announcement on 26 July 2024. That rally was a 64% gain in the stock price. Well done if you participated in that. After that high in July 2024, CHTR began a multiweek pullback that set up the buy-the-dip opportunity. In September 2024, CHTR reached a low of $315.23. That pullback was 48% of the gain from the low in April 2024 at $236.08 to the high in July 2024 at $386.28. When stocks retrace or pullback 50% of a previous advance, that is often an excellent area to buy some shares. I think that is the case here. Notice that CHTR has had buyers step in at this $315 - $320 level several times over the past nine weeks. It looks like buyers are willing to defend this $320 level. Last week, buyers were able to push the stock higher, and it is now above the 30-week EMA. I also find it bullish that the stock has been able to stay above the 30-week EMA during the recent pullback. What I want to see next in the price action is for CHTR to start advancing higher and then that will cause the 30-week EMA to start to slope upwards, which would be another bullish sign. If I see that happen, I would consider adding more shares. From what I see with price action and the 30-week EMA, I think picking up some shares of CHTR at this level is an excellent opportunity. When I buy stock, I want to have momentum on my side. That is where the Percentage Price Oscillator (\"PPO\") comes into play. PPO shows the momentum of the stock for both the short term and the long term. When the black PPO line is above the red signal line that shows bullish short-term momentum. When the black PPO line is below the red signal line, that shows bearish short-term momentum, which is what we have now. That makes sense as CHTR has declined for several weeks and then traded sideways for the last nine weeks. Obviously, there is no bullish momentum over this time period. However, CHTR is displaying bullish long-term momentum. Whenever the black PPO line is above the centerline of the chart or the zero level, that is an indication of bullish long-term momentum. The black PPO line has a reading of 1.379 which is above zero. You can see that the black PPO line doesn’t oscillate above and below zero very often. It stays above or below for a long period of time, and it pays to be on the right side of the long-term momentum. Right now, CHTR has bearish short-term momentum, and bullish long-term momentum. Any rally in the price will most likely flip the short momentum to bullish, but we’ll have to see how things play out. Volume is the next factor in my analysis of a stock to purchase. I want to buy stocks that are being accumulated by institutional money managers. They only buy stocks if they think the stock is undervalued. What I look for in the volume pane of the chart is the big black bars. The black bars show that the stock moved higher for the week. This indicates that the volume pushed the shares higher. Red volume bars show that the stock declined for the week. In other words, sellers drove the price down. I want to see a preponderance of big black bars. The higher the bar, the more volume there was that week. High-volume bars show institutional money managers were active that week. Retail traders like me don’t have enough money to cause spikes in the volume bars. Most of the high-volume bars since the low in April 2024 are black volume bars, showing that institutions have been buying shares of CHTR. I expect another big volume bar when CHTR announces earnings this Friday before the market opens. The question is, what color will the bar be, red or black? That will depend on what the money managers think of the earnings report. My last technical factor is the relative strength of the stock. I want to buy stocks that are outperforming the market. The relative strength line represents a ratio of the price of CHTR to the price of the SP 500 index. When the black line is rising, that means that CHTR is outperforming the SP 500 index. When the black line is declining, that means that CHTR is underperforming the SP 500 index. For most of the past three years, CHTR has underperformed the SP 500 index. Since April 2024, CHTR has traded with the SP 500 index or maybe slightly outperformed the major index. The relative strength line has turned higher recently. I grade the relative strength of CHTR to be neutral at this time. As I mentioned earlier, CHTR announces earnings before the market opens this Friday, November 1. I have no opinion of what to expect, as that is not my area of expertise. However, if you believe that this pullback is a buying opportunity, I suggest that you use a stop loss in case my analysis proves incorrect or the earnings call is not favored by money managers. I would place a stop loss at $310. This represents a loss of about 8%. If I suffer an 8% loss, I can withstand that and find another opportunity. What I don’t want to do is hold shares that end up falling 20%, 30%, 50%, etc. It’s a big loss of capital and a big loss of mental capital as well. I’d much rather take a small loss and move on than take a big loss. Another thing to consider is that if the earnings call disappoints the market, the stock could gap down significantly at the open. With that in mind, another way to position yourself is to buy a smaller number of shares at first. Then, if the earnings call disappoints the market, you have less capital at risk. If the earnings call exceeds the market’s expectation you can add to your holdings knowing that you did pick up some shares at a cheaper price.  In summary, CHTR is a stock that has pulled backed about 50% from its most recent rally, offering a buy-the-dip opportunity. The stock has found support at the $320 level and is trading above its 30-week EMA. Momentum is bearish over the short term, and CHTR has long term bullish momentum. Volume analysis shows that money managers have been buying shares of CHTR and buyers have bought shares of CHTR when prices traded at the $320 level. Relative strength is neutral. The big factor upcoming is the earnings call this Friday. Because of this, I urge you to use a stop loss to protect yourself from a large decline if the earnings call disappoints the market. Another strategy you can take is to buy a smaller stake and if the earnings call is favorable, you can add to your position.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2479143093"}