In his Executive Decision segment of Tuesday's "Mad Money" program, host Jim Cramer spoke with Joe Papa, chairman and CEO of Bausch Health (BHC) , which plans to split itself into three companies but has yet to pull the trigger.
Papa said the split is still happening, but Bausch Health management is balancing the need to move quickly with the desire to maximize value for shareholders, something that's more difficult to gauge in volatile markets. They're not looking for perfect market conditions, he said, but they are looking for "ideal" conditions before executing the transaction.
In the meantime, Papa noted that Bausch Health is generating a lot of cash, which it is using to pay down debt. He was confident that all three of Bausch Health's new entities will create a lot of value for shareholders.
I looked at the charts of BHC on Feb. 22 before it reported fourth-quarter results and wrote, "I have no special knowledge of what BHC is going to report to analysts and shareholders, but the charts and indicators are not yet constructive. Continue to avoid the long side."
Let's check on the charts of BHC again.
In this updated daily bar chart of BHC, below, we can see that prices are still in a downtrend from late April. Prices are just below the declining 50-day moving average line. The slope of the slower-to-react 200-day line is negative. The trading volume has been very active since the beginning of the year and tells me that some traders have been voting with their feet. The On-Balance-Volume (OBV) line shows a decline from early January to the middle of March. The OBV line may be starting to improve but it is a little early to declare that buyers have become more aggressive. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line in sell territory, but the two moving averages that comprise this indicator have crossed to the upside for a cover shorts buy signal.
In this weekly Japanese candlestick chart of BHC, below, we can see that prices are in a longer-term decline from early 2021. BHC is trading below the declining 40-week moving average line. A lower shadow earlier this month shows us some promise that traders are rejecting the lows. This could be the start of a bottoming process. The OBV line has been weakish since last March. The MACD oscillator is bearish but has narrowed in recent weeks.
In this daily Point and Figure chart of BHC, below, we can see a potential downside price target of $20.
In this weekly Point and Figure chart of BHC, below, we used close-only price data. Here the software is projecting a potential price objective in the $16 area.
Bottom line strategy: So far our recommendation to avoid the long side of BHC has paid off. Prices may change direction from down to sideways but that is not quite enough to get me to recommend purchase of BHC.