In his first Executive Decision segment of his "Mad Money" show Monday, host Jim Cramer spoke with Geoff Martha, chairman and CEO of medical device maker Medtronic (MDT) , which has seen its shares under pressure during the pandemic despite a pent-up demand for electric medical procedures.
Martha said Medtronic has moved beyond simple devices and is now implanting real computers inside of patients. These advanced therapies require a lot of work and capital, he said, which is why Medtronic has increased its research and development. It also has levered its balance sheet, making seven recent acquisitions.
Let's check out Medtronic's charts and technical indicators. The last time we looked at MDT was Oct. 15; at that time we wrote, "When we looked at MDT back on May 18, we wrote 'MDT is in no man's land -- too far above where I would risk (below $90) and too far below a breakout point to give me confidence.' Prices weakened into late June. Today I see prices are higher than back in May but the indicators are just not in gear with a bullish recommendation. I would look for some sideways to lower price action in the weeks ahead."
In this updated daily Japanese candlestick chart of MDT, below, we can see that prices declined in the back half of October and into early November. Prices gapped higher in November and continued to rally to new highs. Today we can see a mixed picture with prices in an uptrend above the rising 50-day and rising 200-day moving averages. The On-Balance-Volume (OBV) line did not bottom out until December and its subsequent advance has not taken the OBV line to new highs like prices have done. This is a bearish divergence. The Moving Average Convergence Divergence (MACD) oscillator has turned upward in recent weeks to signal a fresh outright buy signal. We'll see how long this lasts as the moving averages are narrowing already.
In this weekly Japanese candlestick chart of MDT, below, we can see that prices are retesting the highs of 2020. Prices are in an uptrend above the rising 40-week moving average line. The weekly OBV line shows improvement from March but it is still below its peak of 2020. The 12-week price momentum study in the lower panel shows that the pace of the advance has begun to slow.
In this daily Point and Figure chart of MDT, below, we can see a double-top breakout in November (look for the letter "B") and a potential price target in the $156 area.
Bottom line strategy: The daily Point and Figure chart ignores volume and it is bullish, but our other two charts that show the OBV line suggest the bulls are not strongly behind the current advance. Traders should wait for strength above $120 before probing the long side. Risk below $115. The $156 area is the price target for 2021.
