In an "Executive Decision" segment of Mad Money Monday night, Jim Cramer checked in with Vlad Tenev, co-founder and co-CEO of Robinhood, the commission-free trading platform that has been focusing on younger investors.
Tenev explained that Robinhood customers are buying stocks they feel are oversold, including Walt Disney Co. (DIS) .
Cramer discusses other stocks that millenials are buying on the Robinhead platform in his Real Money column, "10 Stocks That Millennials Should Own."
Let's check out the charts and indicators of DIS to see if the timing of these buyers is any good.
In the daily bar chart of DIS, below, we can see the sharp decline in prices from December into March and then the rebound the next several weeks. Prices have been unsuccessful in staying above $105 and the indicators are confirming that condition.
The On-Balance-Volume (OBV) line has trended sideways during the price recovery and Moving Average Convergence Divergence (MACD) oscillator is narrowing from below the zero line -- both of these observations suggest the rebound is "running out of steam."
In the weekly bar chart we can see that prices were nearly cut in half during the Covid-19 selloff but the recovery bounce has been "understated."
Trading volume was heavy but not what I would consider capitulation volume and OBV line is not moving up vigorously. The MACD oscillator has yet to cross to a cover shorts buy signal on this time frame.
In this daily Point and Figure chart of DIS, below, we can see a potential upside price target of $130 but we can also see that a trade at $98 will be a new low for the recent move down and is likely to precipitate further declines.
Bottom-line strategy: From my personal perspective I find that buying a stock that is "oversold" is not as effective as buying a stock that has based. An oversold stock can get more oversold so what we want to really see are bullish divergences and a pattern of aggressive buying. I don't think we are there yet on DIS.