EarningsBeats Digest

Published: Fri, 09/18/20

EarningsBeats.com Digest for September 18, 2020

When Gap Support Meets Price Support

Encore Capital Group (ECPG) is a $1.25 billion consumer finance company that's been one of the stronger performers in its industry. It's been trending higher relative to its peers since early April. But, like many stocks trending higher, it ran into difficulties after announcing an offering - in this case, a senior secured note offering. Announcements like this subject the company's shareholders to potential dilution and normally result in a short-term period of selling. That was the case with ECPG about one week ago as you can see on the chart below:

There's been significant deterioration in ECPG's relative strength and its accumulation/distribution line (AD line) has weakened considerably as well. Yet, the consumer finance space has been rising vs. the S&P 500 in September. Given all of this, it would make sense to keep a very tight leash on ECPG. In fact, a close below 39.38 should be viewed as bearish as that would be beneath the gap support from early August. ECPG is already beneath its 50 day SMA, so losing another key support level would add much more bearishness to the chart.

Happy trading!

Tom Bowley

Chief Market Strategist

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