MercadoLibre SA (MELI) Stock Moves Down and Here’s Why

MercadoLibre SA (NASDAQ: MELI) shares rose on Monday Dec 5 with lower trade volume than normal after a number of analysts weighed in on the investing value of the stock with a downgraded rating.

Meanwhile, the Dow Industrials on Monday opened at an all-time high as investors dismissed concerns about the outcome of Italy’s referendum on Sunday.

The Dow Jones Industrial Average rose DJIA, +0.41% 85 points, or 0.5%, at 19,260, the S&P 500 index SPX, +0.42% began trade 9 points, or 0.4%, higher at 2,201, while the Nasdaq Composite Index COMP, +0.43% advanced 27 points, or 0.5%, at 5,282.

Analysts at Susquehanna downgraded shares of MercadoLibre SA (NASDAQ: MELI) from Positive to Neutral in a research note to investors today. The company currently has a rating of Neutral on the stock. As a means of comparison, a number of other analysts have issued reports on the company in recent days, and the company has earned a consensus one-year price target of $180.00, above the opening price of $152.00, a difference of 11.48 percent. MercadoLibre SA stock has a 52-week high of $193.58. Important and fundamental digressions in the company’s actions, future outlook or industry can cause downgrades as the analysts consider that the future prospects for the security have diminished from the initial recommendation.

MercadoLibre SA (NASDAQ: MELI) shares last traded at $156.84, which represents an increase of $4.28 or 2.81% from the previous closing price. Opening at $152.00, they ranged from $152.00 and $156.84 throughout the day.

MercadoLibre SA (NASDAQ: MELI) now has a market cap of 6.93B.

MercadoLibre SA (NASDAQ: MELI) Average Daily Trading Volume

The stock’s average daily volume is 606,817 shares out of a total float 42,974,000 and some 91,550 shares traded hands yesterday, lower than the norm. Momentum traders often use increases in trading volume to identify heavy volume accumulation or distribution by institutional investors, so look for trading volume to pick up in the coming days.

While higher trading for one day will not mean much, however, a trend of heavy trading volume on the buy side over a period of days or weeks sends a positive cue to market traders that institutions may be moving in, so institutional sponsorship is critical.

Institutional sponsorship is defined by ownership of a stock by mutual funds, banks, pension funds and other large institutions.

These instituitional investors have teams of analysts researching thousands of stocks, so it is good confirmation to see them taking a postion in a stock you are considering.

MercadoLibre SA (NASDAQ: MELI) Moving Averages

A moving average can also act as support or resistance. In an uptrend a 50-day, 100-day or 200-day moving average may act as a support level, as shown in the figure below.

This is because the average acts like a floor (support), so the price bounces up off of it.

In a downtrend a moving average may act as resistance; like a ceiling, the price hits it and then starts to drop again.

By spotting trends, moving averages allow traders to make those trends work in their favor and increase the number of successful trades.

With that in mind, MercadoLibre SA (NASDAQ: MELI) now has a 50-day MA of $167.58 and 200-day MA of $159.30. It has traded in a 52-week range between $84.19 – 193.58 and today’s last price is 18.98%% lower than the 52 week high of $193.58.

Earnings growth is an important factor to research when investing in stocks and investors seek companies that have grown their earnings at least 25% or more for the past 3 years.

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