It looks like bluebird bio Inc. (BLUE) is finally ready to stage a recovery. Prices have slumped lower since its March zenith but a couple of bullish divergences are finally pointing the way to an upside recovery for this stock discussed by Jim Cramer in the Mad Money's "Lightning Round" Monday night.
In the updated daily bar chart of BLUE, below, we can see a number of sell signals along the way down -- moving averages, weakening momentum, bearish volume. That is old news. Let's zero in on the last three months. Yes, prices are still below both declining moving averages, but the daily On-Balance-Volume (OBV) line is at a higher low now than in late June. This is a bullish divergence and indicates to me a shift in who is being more aggressive -- bears or bulls.
In the lower panel is the 12-day price momentum study, which shows a large bullish divergence from April to September. Prices are making lower lows but the momentum study is making higher lows as the pace of the decline slows. The reason the decline is slowing is because someone is buying on a scale down.
In this weekly bar chart of BLUE, below, we can see that prices are below the declining 40-week moving average line but the $135 area looks like it is acting as support. The weekly OBV line is still pointed down but the raw volume histogram right below prices shows that volume has dried up.
In the lower panel is the 12-week price momentum indicator which also shows a bullish divergence since June.
In this Point and Figure chart of BLUE, below, we can see an upside price target of $159.50.
Bottom-line strategy: Aggressive traders could go long BLUE here if they can risk below $130. My upside targets are $160 and then $200.