In one of his "Executive Decision" segments on "Mad Money" Thursday, Jim Cramer sat down with Ed Breen, CEO of DowDuPont Inc. (DWDP) . The chemical giant is gearing up to split itself into three entities in early 2019. Breen said his company is currently a combination of Corveta in agriculture, Dow in material science and DuPont for specialty products. After the split, DowDuPont investors -- which include Jim Cramer's Action Alerts PLUS charitable trust -- will be able to own each of these entities separately.
When asked about his company's ailing stock price Breen admitted that it has been a confusing story for investors to digest and it is taking a lot of time to bring all the pieces together and prepare them to be spun off. I will leave a sum-of-the-parts analysis to someone else and just look at the charts and indicators.
In this daily bar chart of DWDP, below, we can see a downtrend from January with a five-month up-sloping channel pattern from April to the end of August. The thing that is interesting about this channel formation is that the daily On-Balance-Volume (OBV) line was flat the entire time,suggesting a balance between bulls and bears. In September the balance was tipped to the downside as prices broke below the 50- and 200-day moving averages and the OBV line turned lower. A declining OBV line only happens when sellers of a stock are more aggressive. In the lower panel is the 12-day momentum study, which shows a bullish divergence of equal momentum lows when prices made lower lows.
In this limited weekly bar chart of DWDP, below, we can see that prices are below the declining 40-week moving average line. The weekly OBV line is pointed down and the MACD oscillator has just started to narrow, but from below the zero line.
In this Point and Figure chart of DWDP, we can see an upside price target of $67 -- an improvement from current levels but not a breakout above $70.85. A trade at $71.56 would be more impressive.
Bottom line strategy: DWDP declined in October along with the broad market. Prices have rebounded recently and our Point and Figure chart suggests further gains to $67 are possible, but I cannot rule out a retest of the October low in the next two weeks.