There's a bull market in the great outdoors, Jim Cramer proclaimed to viewers of Mad Money Wednesday night. We're seeing strength in RVs, boating, golf and sports of all kinds that allow people to get outside and away from crowds. That's why shares of Polaris (PII) have surged 26% over the past three months.
Two weeks ago Polaris announced three pieces of positive news. First, the company told investors that they've seen a sharp recovery in sales. Second, they reaffirmed their commitment to the dividend. And third, they reached an agreement with creditors to maintain flexibility with their balance sheet. Cramer said these three pieces combined paint a very positive picture for a stock that trades at just 17 times earnings.
While Polaris remains sensitive to trade tensions and a possible recession, the company operates in the right sports at the right moment. ATVs, boats and motorcycles are perfect for social distancing and to get people out of their homes.
Keeping our distance, let's check out the charts of PII.
In this daily bar chart of PII, below, we can see that prices declined from January to early April or for a longer period of time than the broader market. Prices have recovered strongly from early April and have been knocking on a possible breakout to new highs. PII is above the rising 50-day moving average line and the now positive again 200-day moving average line.
The daily On-Balance-Volume (OBV) line shows a rise from early April telling us that buyers were more aggressive but more recently the OBV line has stalled and diverged from the price action. A stalled OBV line suggests that buyers are not willing to be aggressive at these price levels.
The Moving Average Convergence Divergence (MACD) oscillator turned bullish at the end of April and only now looks like it could turn lower to a take profits sell signal.
In this weekly bar chart of PII, below, we get a different perspective on the price action. Here prices look like they have made an impressive rally in a downtrend. If prices can break out over the highs of 2019 we can then talk about a reversal of the downtrend.
The 40-week moving average line has a positive slope again and the OBV line shows a strong two-month move up.
The MACD oscillator has crossed to the upside for a cover shorts buy signal.
In this daily Point and Figure chart of PII, below, we have some notable developments. Prices are still pointed up even with an upside price target but prices are in a significant area of resistance judging by the volume by the price bars on the left scale.
Prices could push higher but a pullback or downward reaction seems like a high probability.
Bottom line strategy: After staying at home since March 7th I could use a good dose of outside activity, but I doubt I will be purchasing an "adult toy". PII has surged into the top end of a resistance zone. Prices could break out on the upside for further gains but right now I think a pullback of some degree is in order. Let's wait and see how that unfolds before making a decision.