In his first Executive Decision segment of Wednesday's "Mad Money" program, Jim Cramer spoke with Tom Linebarger, chairman and CEO of Cummins Inc. (CMI) , an engine maker that is one of the leaders in clean hydrogen fuels.
Linebarger said technology and innovation are at the core of what Cummins does. Beyond engines, Cummins has made several acquisitions for everything from fuel cells to storage, allowing the company to offer complete stationary and mobile systems.
Let's check out the charts of CMI. In our last review of CMI on Feb. 10 we wrote, "We last wrote about CMI on October 5, saying 'CMI is making a move to the upside and traders who are looking to put some cash to work could go long at current levels risking a close below $200 for now while looking for gains to the $246-$250 area.' Now that prices have reached our target area it is a good time to nail down some profits."
In this updated daily bar chart of CMI, below, we can see that the stock price of CMI peaked in March around $275, so nailing down some profits around $250 wasn't far off the mark. With CMI now trading below the declining 50-day moving average line and below the cresting 200-day moving average line we can see we avoided a correction. The daily On-Balance-Volume (OBV) line shows weakness in April and since June, telling us that sellers of CMI have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed to the upside in late June for a cover shorts buy signal but it is still below the zero line in sell territory.
In this weekly Japanese candlestick chart of CMI, below, we can see a weakening picture. Prices are trading below the cresting 40-week moving average line. Last week we can see an upper shadow at the underside of the 40-week line, telling us that the average line is now acting as resistance. The weekly OBV line shows a saw-toothed decline from March. The MACD oscillator is crossing below the zero line for an outright sell signal.
In this daily Point and Figure chart of CMI, below, we can see that prices have just about reached a downside price target in the $236 area. Further weakness is possible.
In this weekly Point and Figure chart of CMI, below, we can see a potential upside price target in the $265 area. A trade at $226.96 will weaken the chart.
Bottom line strategy: With weakness in the broad market averages I am in no rush to repurchase shares of CMI. Stand aside for now.