In his second "Executive Decision" segment of Mad Money Wednesday night, Jim Cramer sat down with Dr. Mike Perry, CEO of Avita Medical (RCEL) , a company pioneering new treatments for burn and wound care.
Perry explained that severe burns are typically treated by taking large areas of skin from other areas of the body and using them to help spur the healing process. This process is very painful and doesn't yield aesthetically pleasing results. Avita's treatment uses significantly less donor skin to create a spray that can be applied to wide areas of the body. Their treatments have been approved for second- and third-degree burns and are available in 50% of burn centers across the country.
Not only is Avita's treatment less painful, Perry said, it's also less costly and provides a better outcome aesthetically. Cramer said Avita's stock is speculative, but very promising.
Let's take a look at this speculative name.
In this daily bar chart of RCEL, below, (note the lack of high and low data earlier in the year), we can see that prices have been in an uptrend with a five-fold increase in less than a year. Prices have crisscrossed the rising 50-day moving average line a number of times over the past year. The rising 200-day moving average line has stayed well below the price activity.
The On-Balance-Volume (OBV) line shows a strong upswing in March/April and then remained steady the rest of the year.
The trend following Moving Average Convergence Divergence (MACD) oscillator has stayed above the zero line for much of the past year. The indicator is just below the zero line now but could soon swing back to a buy signal.
In this weekly line chart of RCEL, below, (note we used a line chart because of lack of high/low data), we can see that prices made a "long base pattern" or "line pattern" before launching its big rally this year. Prices are well above the rising 40-week moving average line but not extended above the line.
The weekly OBV line is very strong and supports and confirms the price gains. The MACD oscillator is bullish but recently turned down to a take profits sell signal or a sell in an uptrend.
In this Point and Figure chart of RCEL, below, we can see a potential upside price target of $19.25.
Bottom line strategy: RCEL has already made a big advance from the $1 area so a period of sideways consolidation would not be unusual. Prices could trade in a $6.50 to $10 range for a number of weeks before making a move to the $19-$20 area. Experienced traders who understand risk could be a buyer in the lower end of this trading range.