Cummins Inc. (CMI) gapped lower Tuesday and more price weakness could lie ahead.
Increased tariffs could hurt the earnings of the engine maker, which saw international sales drop 15%, it was said on Jim Cramer's "Mad Money" on Tuesday.
Let's review the charts and indicators to reach a workable strategy.
In this daily bar chart of CMI, below, we can see that CMI gapped below the rising 50-day moving average line. Prices bounced Wednesday and so far have stopped at the underside of the 50-day line.
The On-Balance-Volume (OBV) line has weakened recently and the Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take profits sell signal. The zero-line is not far below.
In this weekly bar chart of CMI, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line has been rising in line with prices and the MACD oscillator is still bullish.
In this Point and Figure chart of CMI, below, the gaps disappear and a potential downside price target of $151 shows up.
Bottom line strategy: With a downside price target from our Point and Figure chart and some bearish signals on the daily bar chart, we want to be cautious around the long side of CMI.