This market has seen some winners over the past few weeks. One of those has been Lowe's Cos. (LOW) , which reported strong earnings and an 11.2% increase in same store sales. For his first "Executive Decision" segment of Mad Money Wednesday night, Jim Cramer checked in with Lowe's CEO Marvin Ellison to learn more.
Ellison said Lowe's remains committed to the health and safety of their employees. He said that despite the pandemic, housing remains healthy and we still see a shortage of new homes and many aging homes in need of remodeling.
That's why customers have been flocking to Lowe's, as the company offers many ways to buy, including curbside pickup and delivery options. He added that small independent contractors are doing better and we will recover from this disruption.
(For more on Lowe's, see Stephen Guilfoyle's Lowe's Incredible Quarter and How I'm Trading It)
Let's check out the charts and indicators.
In this daily bar chart of LOW, below, we can see that prices have made a very strong rally from the March lows and yesterday got to within a few dollars of making a new 2020 high. LOW is above the bottoming 200-day moving average line and the rising 50-day line.
Trading volume has declined from the upside surge in March but the On-Balance-Volume (OBV) line has rallied to a new high which tells us that buyers of LOW have been more aggressive.
In the lower panel of this chart we plotted the 12-day price momentum study which shows lower highs from April into May, telling us that the pace of the price advance has been slowing. When compared to the market action making new highs we have a bearish divergence. Divergences are leading indicators and give us a heads up that this rally could stall or even reverse.
In this weekly bar chart of LOW, below, we see a mixed picture. Prices are back above the bottoming 40-week moving average line. There is not much selling resistance above the market as prices were only in that area for a couple weeks.
The weekly OBV line is pointed up but still off its best levels. The Moving Average Convergence Divergence (MACD) oscillator just crossed to the upside from below the zero line for a cover shorts buy signal.
In this daily Point and Figure chart of LOW, below, we can see a potential upside price target in the $139 area.
Bottom line strategy: LOW has made a rapid price recovery from the March low. The pace of the rally has slowed in recent weeks so the risk has grown that we see prices trade sideways perhaps in a $125-$110 trading range for a while before renewed gains. A decline to $105 could turn things weaker.