In a belated "Know Your IPO" segment of "Mad Money" Thursday, Jim Cramer looked into the newly minted Reynolds Consumer Products (REYN) .
Reynolds was sold to private equity by Alcoa (AA) in 2007 and once again is publicly traded. Sales have been flat to down over the past few years at Reynolds, though the company has made strides on the bottom line. About 98% of Reynolds' revenues is from the U.S., leaving lots of opportunities to expand overseas. It owns its namesake Reynolds Aluminum foil, as well as Hefty trash and storage bags and various private label brands.
Trading at 18x earnings, Cramer said Reynolds is a buy given how much aluminum foil and trash bags are in our post Covid-19 world.
Let's look at a couple charts to round out the conversation.
In this daily Japanese candlestick chart of REYN, below, we can see the limited history of this company and some potential problems. A bullish hammer pattern in March marked the bottom and on Thursday we can see a spinning top or a long-legged doji pattern marking what may turn out to be a temporary peak. Western charts would say that Thursday was a large outside day and lower close. This is a near-reversal for bar charts. The candle pattern needs a bearish candle here on Friday to confirm it as a reversal. A reversal with candles can be a turn from up to sideways. The slopes of the short 20-day and 50-day moving average lines are positive.
The On-Balance-Volume (OBV) line did not make a new high with the price action, so that is a bearish divergence that needs to be monitored. The 12-day price momentum study in the lower panel also shows a bearish divergence as momentum has made a lower high when prices made a higher high.
In this daily Point and Figure chart of REYN, below, we can see a potential upside price target in the $37 area and some potential chart support from around $30.
Bottom line strategy: On the one hand we have some bearish divergences and on the other hand we have an upside price target on the Point and Figure chart. The end result is probably a sideways trading range for the next several weeks.