In his No Huddle Offense segment during Wednesday's "Mad Money" program, Jim Cramer tipped his hat to Gary Friedman, CEO of home furnishings provider RH (RH) for being among the first to see the market decline.
Six weeks ago, Cramer said, many investors were still "living the dream," confident that rising interest rates and Russia's war in Ukraine wouldn't derail the markets. But Friedman felt otherwise, sounding the alarm on his company's earnings call that wealthy investors were reigning in spending and supply chains weren't getting any better.
"Gary saw it first," Cramer said. Supply chains have gotten worse, oil and food prices are soaring, and wealthy consumers are cutting back their spending. Shares of RH have retreated to 52-week lows as a result.
Let's check out the charts of RH.
In this daily bar chart of RH, below, we can see that prices rolled over from May to November before the decline got rolling. Prices have slumped steadily and RH has been cut well beyond half. Sometimes buyers come back into a stock after a 50% correction but that is not the case with RH. The slope of the popular moving averages is negative. The trading volume has become heavier in the past five weeks or so, telling us that longs are finally getting the bearish message. The On-Balance-Volume (OBV) line has shown us weakness since September as sellers of RH have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator is turning lower again from just below the zero line.
In this weekly Japanese candlestick chart of RH, below, we see a picture that is weak and vulnerable to further declines. Prices are in a downtrend and trade below the bearish 40-week moving average line. The weekly OBV line and the MACD oscillator are both bearish.
In this daily Point and Figure chart of RH, below, we can see a possible downside price objective in the $209 area.
Bottom line strategy: Friedman may have been early to forecast the market's slump, but that has not helped shares of RH sidestep a serious decline. You can buy some new furnishings from RH but defer your purchases of the stock as shares are only likely to go lower.