In his No-Huddle Offense segment of Mad Money Thursday night, Jim Cramer opined on the staying power of our stay-at-home economy. He cited four recent points that show working from home is not a passing fad. Number three was high-end office furniture maker Herman Miller (MLHR) that told investors that it, too, is seeing continued strong sales and home offices across the globe that are being outfitted.
Let's check out the charts of MLHR.
In this daily bar chart of MLHR, below, we can see that prices traded sideways in the $20-$25 area for about five months before gapping to the upside the other day. The move up came fairly suddenly and prices gapped above the still declining 200-day moving average line.
Trading volume exploded and the On-Balance-Volume (OBV) line surged higher on aggressive buying. The Moving Average Convergence Divergence (MACD) oscillator has been hugging the zero line but made a turn higher.
In this weekly bar chart of MLHR, below, the impressive upside price gap on the daily bar chart disappears. Prices are up above the declining 40-week moving average line.
The weekly volume bar and the OBV line show a sharp rise based on the latest numbers. The MACD oscillator has been improving but remains below the zero line.
In this daily Point and Figure chart of MLHR, below, we can see that the price gap disappears on this chart too. The software is projecting a potential upside price target around $60 but in my humble opinion a period of sideways consolidation is more likely before further gains.
Bottom line strategy: Sometimes stocks that are relatively thinly traded - look at the volume before this week - can have big upside and downside price gaps but these gaps tend to be partially filled or even entirely filled. Can MLHR go back down into the $30-$25 area? It's possible so I am in no rush to pay up for a long position. The Point and Figure chart yields a big target of $60 but I want to see some sideways price action before making a buy recommendation.
