Let's continue to take a look at Jim Cramer's game plan for this week from a technical perspective. These are his "Mad Money" trading recommendations using their exclusive Stock Screener. You listened to him on "Mad Money" Friday or you read his views on these companies on Real Money, now here are the charts and indicators.
No matter who wins the election, Jim Cramer says, there are ways to make money. Let's take a closer look, adding the charts to the fundamentals.
In addition to the names we discussed in Part 1 of this series, CVS Health (CVS) and Valeant Pharmaceuticals (VRX) are also on Jim Cramer's shopping list this week. Are these charts healthy or in need of further recuperation?
This daily bar chart of CVS going back 12 months shows a significant price peak in May. Prices have been making lower lows and lower highs the past six months. The 50-day simple moving average line moved below the slower 200-day line in early July for a bearish death cross signal. These two moving averages are still pointed lower and volume has been increasing the past two months. A downtrend with expanding volume has convinced investors that prices are going down and they are voting with their shares.
Similarly, the daily On-Balance-Volume (OBV) line has been in a decline since May. As prices have made lower lows in September into early November we see that the momentum indicator is making equal lows. While this set up is not the strongest bullish divergence it is still a bullish divergence and could foreshadow some price improvement.
Shares of CVS certainly had a strong run to the upside in 2014, but the price action since mid-2015 has been another story. In this weekly chart of CVS, above, we can see that prices are below the declining 40-week moving average line. Volume has increased in the past three months as prices have weakened further. The weekly OBV line has taken a downward path since April-May and signals that investors are being more aggressive on the sell side.
The Moving Average Convergence Divergence (MACD) oscillator moved below the zero line in June for an outright sell signal. There is some chart support on this chart in the $80-$75 area and we should soon see if this support zone will hold.
Valeant Pharmaceuticals has provided plenty of action for financial journalists just like the presidential candidates have provided material for the late-night TV hosts. This election will soon go into the history books and the price action of VRX (chart above) may also make it into a book on technical analysis.
The downtrend in VRX over the past year has been a bruising affair. It has been broken by rallies/bounces lasting two to six weeks with the OBV line improving only to see prices sink to yet another new low for the move down. This reinforces the old Wall Street saying "the trend is your friend." The trend has been down and the moving averages still have negative slopes. Price momentum is not giving us any helpful clues, unfortunately.
This three-year weekly chart, above, gives us the quick story of why VRX has received so much attention. Prices quickly adjusted from nearly reaching $270 to getting reduced to being a teenager. This kind of rapid fall from grace gets attention.
VRX broke below the 40-week moving average line relatively early in the decline and prices and the average are still pointed down. The weekly OBV line has been declining the past year and reinforces the downtrend with more shares of VRX being traded during weeks when VRX has closed lower.
After a cover shorts buy signal in May, the MACD oscillator is still below the zero line. VRX could have a short-covering rally but a more sustained advance will first need a weekly close above $30.