• Revlon stock fell sharply on Thursday after a stellar week.
  • REV stock was up over 600% at one stage but closes 11% lower on Thursday.
  • REV stock was down again in early premarket trading on Friday.

We told you so (sorry, just couldn't resist). In what was not one of our harder calls, we said on Thursday, "In the meantime, some pessimism is likely to return to the stock or realism. That may already be evident from the low relative close on Wednesday. Revlon spiked up to $9.89 before closing lower at $8.14. This is often a signal of falling momentum." So it proved with more declines once the regular session got under way on Thursday and more of the same this morning. A close much lower than the intraday high is one of the key factors we watch for in short-term momentum trading. If you are using candlestick charts it looks pretty ugly with a large wick to the top. 

Revlon Stock News: Chapter 11 holds the cards

We assume most of you are familiar with the Chapter 11 story now. Revlon is in big trouble, obvious statement of the year award, the editor will I'm sure cut that out! A chapter 11 can often see a listed stock continue to trade and the company survive, as was the case with Hertz (HTZ) during the pandemic. Revlon looks to be in a worse state in our view. There is no Fed to print helicopter money since market conditions are tight. It will prove much more difficult to raise capital and exit Chapter 11 successfully in our view without severely burning debt holders and wiping out or massively diluting shareholders. We doubt shareholders will get anything to be perfectly honest. 

News flow in the meantime will likely revolve around various debt deals to keep the company going and the possibility of a white knight bidder. As an ordinary shareholder, do not expect a white knight to do much for your shareholding. 

Revlon Stock Forecast: The long goodbye

Technically, there is nothing to really say here as this company is broken. It probably will not retract all the way back as Chapter 11 takes time, but it is hard to see anything other than a total wipeout for ordinary shareholders. 

REV daily chart

 

 


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