During the ever popular "Lightning Round" segment of Mad Money Tuesday night, one caller asked about Cummins Inc. (CMI) : "Cummins is good. This is a huge China play," replied Cramer.
Let's check out the charts of this company that designs, manufactures, sells and services diesel and alternative fuel engines.
In this daily bar chart of CMI, below, we can see how prices have traded the past 12 months. Prices have trended higher from their late March low. CMI has been losing some of its upward momentum as we can see tests of the rising 50-day moving average line in December and early February.
The trading volume is not doing anything special while the On-Balance-Volume (OBV) line shows weakness from early November. The Moving Average Convergence Divergence (MACD) oscillator is only slightly above the zero line.
In this weekly bar chart of CMI, below, we can see a weakening picture. Yes, prices are still in an uptrend and trade above the rising 40-week moving average line but that is where the bullish story stops.
The OBV line has yet to break above its 2019 highs to confirm the price gains this year. This is a bearish divergence. The MACD oscillator turned lower in November and tells us to take profits.
In this first Point and Figure chart of CMI, below, we used daily price data. Here the software is projecting a price target around $288.
In this weekly Point and Figure chart of CMI, below, we see a potential price target in the $320 area.
Bottom line strategy: We last wrote about CMI on October 5, saying "CMI is making a move to the upside and traders who are looking to put some cash to work could go long at current levels risking a close below $200 for now while looking for gains to the $246-$250 area." Now that prices have reached our target area it is a good time to nail down some profits.
