During the Lightning Round of Tuesday's Mad Money program, Jim Cramer took calls from viewers asking about stocks they are interested in. Jim had just one word for a caller regarding Rite Aid Corp. (RAD) : "Sell." Let's check out the charts and indicators.
In this daily bar chart of RAD, below, we can see that prices have suffered a big decline the past 12 months. Trading volume has been heavier since the May/June period, which may be because there is a shift in ownership as disgruntled longs liquidate their positions. Prices are just now above the flat 50-day moving average line, but for most of the last year RAD has been below this indicator. The slower-to-react 200-day moving average line is bearish.
The daily On-Balance-Volume (OBV) line was in a decline from last October to late August, telling us that sellers of RAD have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator is barely above the zero line and may cross it again for a sell signal.
In this weekly bar chart of RAD, below, we can see a very dramatic decline the past three years. Prices are below the declining 40-week moving average line. Weekly trading volume is heavy the past few months and the weekly OBV is weak. The MACD oscillator has been below the zero for nearly the entire time. Not a pretty technical picture.
In this Point and Figure chart of RAD, below, we can see that prices have been in a consolidation pattern since May (look for the "5" on the chart). There is a lot of volume (left scale) in this area, which is good news and bad news. If prices can rally to $10 it will be positive, but a decline to $6 or $5.50 will likely mean these possible buyers are underwater and we could see further weakness as they liquidate losing positions.
Bottom line strategy: Like Jim Cramer, I have a one-word strategy on RAD: Avoid.