In his first Executive Decision segment of Monday's "Mad Money" program, host Jim Cramer spoke with Aaron Jagdfeld, chairman and CEO of Generac Holdings Inc. (GNRC) , the generator manufacturer.
Jagdfeld said everyone takes power for granted until they don't have it, especially at home. But power outages are on the rise, both in frequency and duration, he said, which has been brought on by three things.
First, Jagdfeld said, we're decarbonizing our electric grid, which adds to volatility. Second, we're electrifying everything, from heating to vehicles, which is increasing demand. And third, climate change is making severe weather events more common, whether it be heat waves in the summer or brutal winter storms like we saw in Texas.
Generac is also the leading provider of power backup solutions for the telco industry, which is spending big on 5G wireless capacity.
In our last review of GNRC on May 5 we wrote, "GNRC has made a significant rally the past two years so a period of consolidation or even a downward correction should not come as a big surprise. Traders should avoid the long side of GNRC and let this correction play out."
Let's check on the charts again.
In this updated daily bar chart of GNRC, below, we can see that prices have slipped since our last review. The slope of the 50-day moving average line has turned negative. The On-Balance-Volume (OBV) line has stayed on the defensive and the Moving Average Convergence Divergence (MACD) oscillator is below the zero line in sell territory.
In this weekly Japanese candlestick chart of GNRC, below, we see a mixed picture. Prices have been weakening and that is evident with the red candles, which tell us that the close is lower than the open. There are some small lower shadows, telling us that traders are rejecting the lows and prices have so far stopped short of the support that starts around $280. The OBV line is still in a decline and the MACD oscillator is pointed down toward the zero line.
In this daily Point and Figure chart of GNRC, below, we can see a downside price target in the $246 area. Prices may not decline that much because of the anticipated support area on the left side of the chart.
In this weekly Point and Figure chart of GNRC, below, we see a more bearish price target in the $236 area.
Bottom line strategy: After Superstorm Sandy I did check out buying a Generac generator but I did not purchase it. Today I looked at the charts of GNRC and I am again suggesting deferring purchases for the time being.