CoreCivic, Inc. (CXW) adopted its current ambiguous name in 2016, abandoning the former Corrections Corporation of America. The rebranding marked an unveiled attempt to draw attention away from its primary business as the largest prison-for-profit company in the United States. It's clear that folks now recognize the true identity because the stock sold off on heavy volume at the same time the George Floyd protests broke out earlier this month.

The company's business has avoided the lion's share of outrage up to this point, but the outcry for police reform is likely to expand naturally into the criminal justice system. The United States holds a higher percentage of its citizens in prison – 655 per 100,000 in population – than any other civilized country including China. As a result, true reform could signal the permanent demise of this questionable industry.

The stock isn't perfectly placed for aggressive short sales, but that could change soon because it has now reversed at 200-day exponential moving average (EMA) resistance after a bounce off a 16-year low that undercut the deep 2009 low by less than two points. A retracement into the moving average or the completion of an 11-year breakdown would both set off major sell signals, perhaps continuing the long and slow crawl toward oblivion that started in 2017.

CXW Long-Term Chart (1997 – 2020)

Long-term chart showing the share price performance of CoreCivic, Inc. (CXW)

The company came public in the mid-$90s in July 1997 and entered a steady uptrend that posted an all-time high near $150 at year end. Aggressive bears then took control, generating a steep downtrend that carved an all-time low at 63 cents exactly three years later. A healthy uptick through the middle of decade booked modest gains, topping out at $33.40 in the summer of 2007, ahead of a steep decline during the 2008 economic collapse.

The stock posted a higher low in the single digits in March 2009 and turned higher once again, completing a round trip into the prior high in 2012. An immediate breakout failed to attract committed buying interest, adding just eight points into 2013. Price action then carved a double top at that level, breaking down during the "mini flash crash" in August 2015. Not surprisingly, the decline ended after the presidential election, yielding a V-shaped pattern that stalled at the 2007 peak in 2017.

A slow-motion pullback finally reached the 2016 low in March 2020, triggering an instant breakdown to a 16-year low, followed by a five-point bounce into early June, when Floyd's death sent shock waves around the world. The stock has given up more than half of the bounce this month but is still holding above the 2009 low at $9.50. There's little or no support below that level, raising the potential for profitable long-term short sales.

The monthly stochastic oscillator dumped into the oversold level in March, posting the most extreme reading in 20 years. A bullish April crossover has failed to stir buying interest, raising the odds that the signal will fail. However, the favorable positioning might support a final bounce into the underside of the 2016 low between $13 and $14, which has narrowly aligned with 200-day EMA resistance.

CXW Short-Term Chart (2016 – 2020)

Short-term chart showing the share price performance of CoreCivic, Inc. (CXW)

The on-balance volume (OBV) accumulation-distribution indicator posted a multi-year low in November 2016 and turned higher in a modest accumulation phase that topped out in August 2018. Slow but steady deterioration since that time has reached a three-year low just above the deepest part of the dip. Look for OBV to undercut that level at the same time as a breakdown, adding fuel to the bearish cause.

A breakdown through $9.50 would target the 2001 low at 63 cents because that would mark the long-term 100% retracement. Keep in mind that this is a relatively slow mover, so the downside target could take years to reach, if at all. Realistically, the stock won't get to that level without fears of bankruptcy driving price action, but many folks won't mind if this type of business gets tossed onto the dump heap of history.

The Bottom Line

America's largest private prison company is selling off in reaction to George Floyd protests, with reforms raising the potential for much lower stock prices.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.