In his second "Executive Decision" segment of Mad Money Thursday night, Jim Cramer spoke with Gina Drosos, CEO of Signet Jewelers (SIG) , the jewelry store conglomerate.
Drosos said Signet had a great Black Friday weekend, which followed strong sales in October. They correctly predicted that shoppers would start the holiday season early and they are ready with stocked stores and a full staff.
Signet has also made a lot of progress cleaning up the balance sheet. Drosos said they have great working capital and better inventory management.
Signet was also rated one of the top places to work, Drosos noted. Improving culture has been a top priority for the company. Signet has raised wages and begun offering new benefits to employees.
We reviewed the charts of SIG on October 13 and wrote that "The risks of staying long SIG have grown and I would advise traders to avoid the long side of SIG." Prices rallied into the middle of November before turning lower.
Let's put on the jeweler's loop again.
In this daily bar chart of SIG, below, we can see that prices have broken below the rising 50-day moving average line. SIG is still above the rising 200-day line. The On-Balance-Volume (OBV) line quietly rolled over last month telling us of a pickup in aggressive selling.
The Moving Average Convergence Divergence (MACD) oscillator has quickly turned lower. We now have a take profit sell signal but the oscillator is getting closer to the zero line and an outright sell signal.
In this weekly Japanese candlestick chart of SIG, below, we can see a bearish engulfing pattern in early November - this is a highly reliable (in my opinion) top reversal pattern. Prices are still above the rising 40-week moving average line but the weekly OBV line has begun to rollover. The MACD oscillator is close to a downside crossover and a take profit sell signal.
In this daily Point and Figure chart of SIG, below, we can see that prices are close to reaching a downside price target of $85.
In this weekly Point and Figure chart of SIG, below, we can see a tentative downside price target in the $61 area.
Bottom line strategy: Fundamental stories are interesting but if they are not supported by the price action and indicators I tend to go with the price action. I would avoid the long side of SIG.
