In his first "Executive Decision" segment of Mad Money Wednesday night, Jim Cramer spoke with Ynon Kreiz, CEO of toy maker Mattel (MAT) , which just reported a top- and bottom-line beat with strong guidance. Despite their numbers, shares closed the day down 2%.
Mattel saw its best fourth-quarter growth in 15 years, Kreiz said, and the company overall saw strong demand to cap off an exceptional year.
In addition to toys, Mattel is doubling down on toy-related entertainment, with 11 films and 17 TV shows currently in production, and another 25 in development, Kreiz added.
Mattel has improved its cash flow for three years in a row, using its excess cash to pay down debt and improve its balance sheet.
We last reviewed the charts of MAT back on October 26 and recommended that "Traders could look to go long MAT at $14 or a shade under. Risk to $12.50 and $20 is our price target." Prices have not yet reached the $20 price target but this is still a good time to check them out again.
In this updated daily Japanese candlestick chart of MAT, below, we can see that prices have rallied from late October. Wednesday's candle looks like a bearish hanging man pattern but it needs bearish confirmation today. We can see that MAT is trading above the rising 50-day moving average which was tested successfully in January and again yesterday. The slower-to-react 200-day line also has a positive slope and intersects just below $13.
The trading volume has been lite and the daily On-Balance-Volume (OBV) line has been stalled since the middle of December. Lately I could say the OBV line has taken on a slight downward slant.
The Moving Average Convergence Divergence (MACD) has been weakening since the middle of December telling us that the strength of the uptrend is fading. Now the oscillator has narrowed and could turn to the upside for a new buy signal. It all depends on how prices perform from here.
In this weekly Japanese candlestick chart of MAT, below, we can see that prices have nearly tripled since their March nadir. The candles in the past few weeks are toppy but that may mean the trend goes sideways for a while. The slope of the 40-week moving average line is positive.
The OBV line has rolled over the past two months and suggests that traders are shifting from aggressive buyers to aggressive sellers. The MACD oscillator has narrowed recently and we could see a take profit sell signal if the two moving averages of the oscillator cross to the downside.
In this daily Point and Figure chart of MAT, below, we can see a new upside price target in the $23 area. We can also see that a trade at $16.91 or lower may be needed to weaken the picture.
Bottom line strategy: Traders long MAT from late October can continue to hold those positions but raise sell stops to just below $17. A weak performance today is a problem but a rally to $19.50 will probably refresh the uptrend. Watch this one closer.
