Medifast Can Help With Your Diet - But Maybe Not Your Portfolio

Analysis and trading strategy on MED stock.

The fast-paced Lightning Round segment of Mad Money is a favorite part of the show according to viewers. Callers get a shot at asking Jim Cramer about companies that they are interested in. Thursday night one caller asked about Medifast Inc. (MED) . "I like this idea. People are going to want to stay in shape more after the pandemic," commented Cramer.

Medifast  is a meal replacement program for weight loss. The company ships prepackaged meals and ready-to-eat snacks to your home that are designed to help you reduce your calorie intake. 

Let's check out the charts.  

In the daily bar chart of MED, below, we can see that prices have been in a downtrend the past 12 months. MED is trading around the declining 200-day moving average line but above the rising 50-day moving average line. Prices have doubled from their March low but we haven't broken above the January peak so technically we are still in a downtrend.

The On-Balance-Volume (OBV) line shows a decline into April but a bullish divergence when compared to the price action which made a lower low to create a bullish divergence.

The Moving Average Convergence Divergence (MACD) oscillator moved above the zero line early this month for a buy signal but it has since narrowed and is close to a downside crossover and a take profits sell signal. 

 

In the weekly bar chart of MED we can see that prices have had a long and hard decline the past few years. Prices are testing the declining 40-week moving average line.

 

The weekly OBV line shows a decline in the early part of this year and then a limited recovery. The MACD oscillator has been below the zero line since early 2019 and only now shows a cover shorts buy signal. 

 

 

In this Point and Figure chart of MED, below, we can see a modest upside price target in the $112 area.  

 

Bottom-line strategy: Maybe people will be concerned about losing weight when their stay-at-home restrictions are lifted, but the charts of MED do not yet tell me that shakes and bars are going to do it. Avoid the long side until we see better signs of aggressive buying. 

 

Employees of TheStreet are prohibited from trading individual securities.