In his second "Executive Decision" segment of Mad Money last night our own Jim Cramer sat down with Robert Friel, the chairman, CEO and president of PerkinElmer, Inc. (PKI) . PKI is a maker of diagnostic and life sciences testing equipment.
Understanding the fundamentals of what is driving earnings is important but I like to look at the charts and indicators.
(For more on PKI, see Forgive and Forget -- and Buy: Cramer's 'Mad Money' Recap)
In this daily bar chart of PKI, below, we can see that last week prices soared and broke out above the January high. Prices are above the rising 50-day moving average line and the bullish 200-day moving average line. Notice the sharp rise in trading volume on the rally?
The daily On-Balance-Volume (OBV) line has been rising throughout all of July telling us that traders turned more aggressive on the buy side.
The trend-following Moving Average Convergence Divergence (MACD) oscillator moved above the zero line last month for an outright go long signal.
In this weekly bar chart of PKI, below, we can see that prices are above the rising 40-week moving average line.
The weekly OBV line has been generally positive the last three years and is close to making a new all-time high to confirm the recent upside breakout.
The weekly MACD has turned up from above the zero line - this is a fresh go long signal.
In this Point and Figure chart of PKI, below, we can see the breakout over the January peak. An upside price target of $118.54 is being projected.
Bottom line strategy: PKI is likely to form a bullish pennant or flag pattern. Traders should use this anticipated sideways price action to go long. Risk below $81 for now looking for gains to the round number of $100 and then the $118 area.
