Select Medical Holdings (SEM) : "That's an undervalued situation and I like it very much." That was the response by Jim Cramer to a caller during his fast-paced Lightning Round, a favorite part of the Mad Money program he hosts. Select Medical is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers.
Let's review the charts of SEM.
In this daily bar chart of SEM, below, we can see a saucer-like base pattern from January to July. Prices broke out to the upside in late July and then quickly declined to retest the top of the base pattern (like the handle of a cup and handle pattern).
The 50-day moving average line just crossed above the 200-day line for what is commonly called a bullish golden cross.
The On-Balance-Volume (OBV) line has been rising on the right side of saucer from early June.
The Moving Average Convergence Divergence (MACD) oscillator moved above the zero line in May for an outright buy signal. The MACD oscillator is still above the zero line.
In this weekly bar chart of SEM, below, we can see that prices are above the declining 40-week moving average line.
The weekly OBV line peaked a year ago but it has been improving since May.
The MACD oscillator is crossing the zero line from below for a new buy signal.
In this weekly Point and Figure chart of SEM, below, we can see a modest upside price target of $18.
Bottom line strategy: SEM has rebased since January and it looks like it is ready to resume its longer-term uptrend. Traders could go long here and risk a close below $14.