Herman Miller Inc. (MLHR) gapped sharply higher and made a large high/low range on Tuesday. Taken by itself it was a very strong day, with higher-than-usual volume. Sounds pretty bullish, but that may not translate into a major move higher from here. Let's examine the charts and indicators before deciding on a course of action for the maker of office furniture, which also earns a look from Jim Cramer in his opening piece this morning.
In this updated daily bar chart of MLHR, below, we can see a broad sideways market. There are some rapid moves up and some sharp moves down. Following moving average signals probably would have lost you money. A big sell-off in March would have cost you money even with the longer 200-day moving average line. A very difficult pattern to trade, in my opinion. If you look at the On-Balance-Volume (OBV) line you get an entirely different perspective -- a relatively smooth uptrend the past 12 months even with the big declines. This suggests that sellers of MLHR were not aggressive when prices fell hard, which I find interesting. The Moving Average Convergence Divergence (MACD) oscillator followed prices up and down and is now back above the zero line in a bullish configuration.
In this weekly bar chart of MLHR, below, we can see an upward sloping channel the past three years. Prices have made higher lows, but it takes patience for the higher highs to materialize. Prices are currently above the flat 40-week moving average line. The weekly OBV line has moved higher to confirm the rising trend. The weekly MACD oscillator gave a cover-shorts buy signal in early June and could soon cross above the zero line for an outright go-long signal.
In this Point and Figure chart of MLHR, below, we manipulated prices a while to come up an upside price target. (We had to use a weekly close only filter.) A modest $43.79 price target is shown.
Bottom line: If we only looked at the OBV line it would be easy to say that traders should go long at current levels, but that would be ignoring some of the sharp price swings of the past year. Traders should be patient buyers and wait for a pullback closer to $37 and then risk to $34. The low $40s is our price target.