Last night on Mad Money, Jim Cramer mentioned Baxter International (BAX) saying that if it can plunge 10% in a single day, that's not a place he'd be putting his money. Let's check out the charts and indicators Friday. Maybe they agree with Cramer.
In the daily bar chart of BAX, below, we can see a sharp decline in October that included a gap to the downside earlier this week. Prices have closed below both the 50-day and the 200-day moving averages. The slopes of both of these lagging indicators are negative or bearish.
The daily On-Balance-Volume (OBV) line showed a positive trend until late September. For the past five weeks the OBV line has weakened and tells us that sellers of BAX have become more bearish.
The Moving Average Convergence Divergence (MACD) oscillator is well below the zero line in a clear sell signal.
In the weekly bar chart of BAX, below, we can see a number of sell signals. Prices are below the now declining 40-week moving average line.
The weekly OBV line has turned lower in the past two months signaling a shift to aggressive selling from aggressive buying.
The MACD oscillator on this time frame has turned down to another take profits sell signal and is quickly head down to the zero line and potential outright sell signal.
In this long-term Point and Figure chart of BAX, below, we can see a potential downside price target of $46.
Bottom-line technical strategy: With the break of the February/April lows BAX is in a weak technical position. Prices could bounce to fill the recent gap but further declines are likely. Avoid the long side.
