During Friday's Mad Money program, Jim Cramer outlined for his viewers more of his game plan for this week. Cramer said that earnings continued on Wednesday with Winnebago (WGO) and KB Home (KBH) .
Winnebago will have strong results, but no one seems to care.
If KB Home is strong, Cramer suggested buying Lennar ( LEN) . We reviewed the charts of LEN on June 14 so let's focus on KBH.
In this daily bar chart of KBH, below, we can see a short-lived new high in early May followed by a pullback into June. Prices are trading below the now declining 50-day moving average line. The rising 200-day moving average line has a positive slope and intersects around $40.50 or so.
The On-Balance-Volume (OBV) line shows some weakness from early March telling us that sellers of KBH have been more aggressive.
The 12-day price momentum study shows a low in late May and a higher low in June. This tells us that the pace of the decline is slowing.
When compared to the price action, the MACD is a bullish divergence and could be foreshadowing a recovery rally.
In this weekly Japanese candlestick chart of KBH, below, we can see a mixed picture. Prices are still in an uptrend as they trade above the rising 40-week moving average line. A large bearish engulfing pattern can be seen at the beginning of May. This marks a high for now.
The weekly OBV line shows weakness from early May and the MACD oscillator has crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of KBH, below, we can see that the software is projecting the $40 area as a potential downside price target.
In this weekly Point and Figure chart of KBH, below, we see a lot more price history. Here the software is suggesting $52 as a price target.
Bottom line strategy: The charts and indicators of KBH suggest to me that the downside is a little limited right now and that looking out a few months we are more likely to see new highs. Buyers should risk to $39. $52 is our nearest target.
