During Tuesday's "Mad Money" program Jim Cramer discussed the fast-food chain Wendy's Co. (WEN) .
Despite Wendy's crashing from $24 in late February to just $7 a share on March 18, Cramer said Wendy's is a well-run company and an iconic brand. The company is deemed essential almost everywhere. It also excels at drive-through and delivery.
While Wendy's did suspend its stock buyback program and took down additional revolving credit lines, Cramer said management is just being cautious. Shares have already recovered to $20 and trade at just 24x 2022 earnings.
Cramer said he would not be a buyer at current levels, so let's check out the charts to see where a good trade might be located.
In this daily bar chart of WEN, below, we can see that prices indeed plunged in March and then rebounded quickly. Prices are above the declining 50-day moving average line and testing the declining 200-day moving average line. The trading volume swelled sharply from late February into March compared to the previous three months. The trading volume has declined the past six weeks or so but the On-Balance-Volume (OBV) line has risen, telling us that buyers of WEN have been more aggressive since the low. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line in buy territory -- not many stocks can say that today.
In this weekly bar chart of WEN, below, we can see that prices were in a steady uptrend from 2015 and then in just a few weeks erased those gains. Prices have rebounded to retest the declining 40-week moving average line. The weekly OBV line has made a new high for the move up and could be foreshadowing new price highs for WEN. The MACD oscillator is poised to cross to the upside for a cover shorts buy signal.
In this daily Point and Figure chart of WEN, below, we can see the steep decline and the steep rally back. A potential $27 price target is projected.
Bottom line strategy: Aggressive traders could go long WEN on a dip back to around $18, risking a close below $16.