ViacomCBS Has Fallen 40% in Four Days - Time to Buy the Drop?

ViacomCBS  (VIACA) - Get Report has been on a rollercoaster ride over the past few weeks, and more recently the past few days.

The stock is starting to look like GameStop  (GME) - Get Report or some other Reddit-meme stock.

ViacomCBS stock rallied for 13 straight weeks before topping out at $101.97 on March 15. The recent pullback has been intense, with shares down almost 10% on Friday alone.

In the last four days, shares have fallen more than 40%.

The stock is selling off after the company announced a stock sale. After such a magnificent rally - up about 10-fold from the March 2020 low - how could management not raise capital?

Particularly since the media landscape continues to shift and as Netflix  (NFLX) - Get Report, Disney  (DIS) - Get Report and others rack up huge subscriber numbers. For its part, Disney has already snagged more than 100 million Disney+ subscribers.

In any regard, what do we make of ViacomCBS after the drop?

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Trading ViacomCBS

Friday’s price action is both disturbing and disappointing. Prior to Friday, we had a doji indecision candle at the 50-day moving average. Shares were down about 34% from the recent high, volume was lower than the previous day and there was some divergence on the overbought/oversold measure (the Williams%R reading).

Coming into the session, I was looking for one of two things: either a rotation over Thursday’s high or a break of Thursday’s low that was quickly recaptured.

The former would give bulls the rotation they needed to potentially jam the stock higher. The latter would give them a reversal to trade with a defined low.

Neither scenario played out, as Thursday’s low broke and opened the floodgates to more selling. For now, shares are also breaking through the $60 to $61 area.

Below this area now, I want to see if the $58.30 level holds. If that zone breaks, then $50 could be in play. Not only would this represent a ~50% loss from the highs, it’s also a key psychological level.

Further, it’s where the 100-day and 21-week moving averages come into play.

On the upside, ViacomCBS stock needs to reclaim the 50-day moving average.

In the future, pay attention to some of the stock’s clues. For instance, notice that ViacomCBS failed to make a higher high on Monday. Then notice the way it failed to hold several key levels on the gap down. A 15% loss from the highs is painful, but it’s better than a 40% punch to the gut.