In his first Executive Decision segment of the "Mad Money" program Wednesday, host Jim Cramer spoke with Kevin Sayer, chairman, president and CEO of DexCom Inc. (DXCM) , a maker of medical devices for monitoring diabetics that delivered strong earnings even with the pandemic.
Sayer said DexCom has been helping patients to gather the information they need to make decisions about their care. Diabetes is a lifelong condition, he said, that needs to be managed early on to ensure the most positive outcomes.
Sayer said DexCom has been modifying its products to interface with hospital systems so that healthcare providers can monitor the glucose levels of Covid-19 patients without entering the room.
Cramer said DexCom's shares should be higher.
Let's check out DexCom's charts and indicators for support. When we last looked at DXCM on May 12 we were looking for a pause or correction in the uptrend.
In this daily bar chart of DXCM, below, we can see that prices pulled back in the back half of May and into June. Prices resumed their advance in June and posted new highs this month. DXCM is trading above the 50-day moving average line, but the slope of the line has turned flat. The 200-day moving average line is still positive but it intersects down around $290.
Trading volume has slowed down from June into July, suggesting that traders are moving their attention to other stocks. The On-Balance-Volume (OBV) line has been flat this month, telling us that buyers and sellers of DXCM are largely in balance. The Moving Average Convergence Divergence (MACD) oscillator has rolled over to a take profits sell signal. This indicator is not that far above the zero line, so it should be watched for a possible outright sell signal.
In this weekly bar chart of DXCM, below, we can see some weakness. Prices are still in an uptrend and well above the rising 40-week moving average line. However, the OBV line has been flat the past two to three months and has diverged bearishly from the price action. The 12-week price momentum study shows that upside momentum has been weakening. Momentum often peaks before the final price high.
In this daily Point and Figure chart of DXCM, below, we can see that prices are in an uptrend with a higher price target of $527. We also can see that a trade at $400 or $396 will probably weaken the picture.
Bottom line strategy: With a flat and diverging OBV line and weakening price momentum traders and investors who are long DXCM should consider booking some profits and/or tightening sell stops as another correction/pullback could unfold in the weeks ahead.