Should Investors Feel Secure With ADT?

The price gap and subsequent action on ADT tells the real story.
Stocks quotes in this article: ADT

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.
 
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are prohibited from trading individual securities.

TAGS: Investing | Stocks | Technical Analysis | Household Products | Technology Hardware & Equipment | Mad Money

More from Stocks

Here's the Secret to Market Timing

James "Rev Shark" DePorre

You've probably been told timing the market is futile, but here's a way to make it possible -- if you're willing to do the work.

It's Official: That Hairy Animal With Claws and Sharp Teeth Is a Bear

James "Rev Shark" DePorre

Along with the media proclamation of a bear market, we have some improvement in the charts of many smaller stocks, but ...

Applied Materials Slips on Miss: Where Will the Chips May Fall

Bruce Kamich

Let's see what the charts say.

Consumer Confidence Is Shot

Bret Jensen

Until things start to improve for the average consumer, it is hard to see significant upward moves for either the markets or economic activity.

I'm Cautious on Marvell Technology Ahead of Earnings

Bruce Kamich

Let's review the charts and indicators.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight