During Tuesday night's Mad Money program, Jim Cramer said bad news was treated as good news, at least in the case of Masco Corp. (MAS) , which saw terrible earnings, yet was able to rally anyway. A technical analyst, like me, would say that was the discounting nature of the market. Remember that old saying? Buy the rumor and sell the news.
Let's see what the charts and indicators look like for MAS.
In the daily bar chart of MAS, below, we can see that prices have trended lower for much of the past 12 months. Prices are below the declining 50-day and 200-day moving average lines.
The daily On-Balance-Volume (OBV) line has moved lower from January and tells me that sellers of MAS have been more aggressive. Because the OBV line has not turned to the upside in a meaningful way I would not anticipate the start of an uptrend for MAS.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has been below the zero line since late August and could soon cross to the upside for a cover shorts buy signal.
In the weekly bar chart of MAS, below, we can see that the decline in the share price of MAS has done a lot damage on this chart. Prices are below the declining 40-week moving average line. Key support around $36 has been broken and the $36-$40 area will now act as resistance. Next chart support may develop in the $26-$24 area.
The weekly OBV line has been declining since January and tells me that there has been a significant amount of liquidation (selling). The weekly MACD oscillator is bearish and won't be crossing to the upside anytime soon, in my opinion.
In this Point and Figure chart of MAS, below, we can see the breakdown from the top or distribution pattern. A $21.63 price target is being projected.
Bottom-line strategy: Volume was heavy recently as prices traded around $28. This might be a low but certainly not a bottom. The $22 area is the next downside price target.