In an Executive Decision segment of "Mad Money" on Wednesday, host Jim Cramer spoke with Mick Farrell, CEO of ResMed Inc. (RMD) , a maker of ventilators and CPAP equipment.
Farrell said ResMed has been following the coronavirus pandemic from the beginning. All of its factories around the world are working around the clock, and their goal is to ship two to three times the number of ventilators they did last year and 10 times the number of masks.
Farrell said the bottleneck is not in manufacturing these units, but in procuring the 500 parts needed to build them. ResMed is looking to work with anyone who can help solve the parts problem, he said.
Let's take a look at the charts and indicators for any technical bottlenecks.
In this daily bar chart of RMD, below, we can see that prices sold off sharply from the middle of February to the middle of March -- a path all too familiar with millions of investors. Prices rebounded in recent sessions to regain the stock's position above the rising 200-day moving average line but still below the declining 50-day moving average line. Trading volume has been pretty good the past 12 months and surged to a high into the March nadir. This heavy volume may have been a washout of weaker holders.
The daily On-Balance-Volume (OBV) line shows a bullish rise right up into the middle of February and only a very modest decline since. This is a good sign that most holders of RMD stayed with their positions. It looks like the OBV line is attempting to turn higher again. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside, generating a cover shorts buy signal.
In this weekly bar chart of RMD, below, we can see that the price of RMD has more than doubled in the past three years. Prices found support in the upper part of the big consolidation pattern in 2018 and early 2019. This decline was not a game changer for the stock. The 40-week moving average line is still pointed upward. The weekly OBV line only shows a recent minor dip and not weeks or months of aggressive selling. The MACD oscillator is still above the zero line and starting to narrow.
In this Point and Figure chart of RMD, below, we used daily price data to construct the chart. Here we can see that the software is projecting a potential upside price target of $194.
Bottom line strategy: Not only is ResMed in a business that is still operating and in high demand right now, but all the charts above also tell us a bullish story. They show a long multiyear rally with a correction down to a support zone. The Point and Figure chart shows a price target that is a new high. All we need to do is to go long around current levels and risk a close below $130 for now.
