Should Investors Feel Secure With ADT?

The price gap and subsequent action on ADT tells the real story.

The rapid-fire Lightning Round segment of Mad Money is a viewer favorite. Thursday evening one caller asked about ADT Inc. (ADT) . "I don't like that company and I don't think it's run very well," replied host Jim Cramer.

Let's check out the charts and indicators of this home security company. 

In this daily bar chart of ADT, below, we can see that the shares declined from late November and made a small bottom in the $4 area in March/April. Prices rallied and ended with a huge gap up and spike high in early August. Reality set in and prices declined quickly and gapped lower this month.

Prices are retesting support in the $8 area from June and July but with the On-Balance-Volume (OBV) line pointed down and the Moving Average Convergence Divergence (MACD) oscillator bearish this support zone may not hold up for long. 

 

In the weekly bar chart of ADT, below, we can see that the shares are pointed down for a likely test of the rising 40-week moving average line. The weekly OBV line is giving back its sharp advance and the MACD oscillator has crossed to the downside for a take profits sell signal. 

 

 

In this Point and Figure chart of ADT, below, we can see a potential price target in the $6 area.  

 

 

 

Bottom-line strategy: The gap lower on ADT earlier this month put prices back below the rising 50-day moving average line. Prices continued lower after the gap telling us that sellers were not finished. With a Point and Figure target below $6 we anticipate further declines in ADT. Avoid.

 

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