Shares of the diversified investment banking giant and wealth management company Morgan Stanley (MS) closed Friday at $43.43, down 17.2% year to date and in bear market territory at 26.9% below the 2018 high of $59.38 set on March 12. The stock set its 2018 low of $42.86 on Friday, Oct. 12.
Analysts expect Morgan Stanley to disclose earnings per share of $1.03 when the company reports results before the opening bell on Tuesday, Oct. 16. The investment banker beat earnings-per-share estimates for 11 consecutive quarters, but that has not helped the stock. Zacks Equity Research projects that this earnings report will be favorable given recently raised estimates for the quarter ending in September. The daily and weekly charts do not support this optimism.
Not shown on the charts is the fact that Morgan Stanley stock set its all-time intraday high of $91.96 in September 2000. In addition, the stock is below its June 2007 high of $76.04. The post-crash of 2008 low is $6.71 set in October 2008. Keep in mind that the bigger banks tied to global banking activities could have unforeseen liquidity risks as global economies falter.
The daily chart for Morgan Stanley
The daily chart shows that Morgan Stanley has been below a "death cross" since June 26. A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving average, indicating that lower prices lie ahead. The stock has been trading lower since Morgan Stanley released its previous earnings report on July 18. The top horizontal line is my semiannual pivot of $49.77, which was a magnet between July 20 and Sept. 21. The break of this line led the stock to my monthly pivot for October at $43.82, which is the lower horizontal line.
The weekly chart for Morgan Stanley
The weekly chart for Morgan Stanley has been negative since the end of September, with the stock below its five-week modified moving average of $47.17. The stock is above its 200-week simple moving average at $40.26, which is the "reversion to the mean," last tested during the week of Aug. 19, 2016, when the average was $29.92. The 12 x 3 x 3 weekly slow stochastic reading slipped to 24.01 last week, down from 32.54 on Oct. 5.
Given these charts and analysis, investors should consider an initial position versus the monthly pivot of $43.82, given the stock's status of being "too cheap to ignore." Buying weakness to the 200-week simple moving average of $40.26 is a second option. My annual value level is the next buy level at $39.43. Investors should consider reducing holdings on strength to my semiannual risky level of $49.77.