There's a new dynamic in the markets and it's the fundamentals against the "fear-a-mentals," Jim Cramer told his viewers of "Mad Money" Tuesday and as he wrote about in his opening Real Money column here on Wednesday morning. On one side are the companies with strong earnings and excellent execution. On the other side are fearful investors assuming that everything that can go wrong, has gone wrong.
Cramer said no stock better exemplifies this new dynamic than United Technologies Inc. (UTX) , a company that on the surface has exposure to Boeing Co.'s (BA) 737 Max woes, the coronavirus in China and stagnant defense spending.
Let's check out the charts and indicators so we can add that perspective to the conversation.
In this daily bar chart of UTX, below, we can see that prices have traded higher over the past year. UTX is above the rising 50-day moving average line after a test of the line on Tuesday. The rising 200-day moving average line is below the price action and was last tested in early October. The daily On-Balance-Volume (OBV) has been moving higher from June and tells us that buyers of UTX have acted more aggressively than sellers. The Moving Average Convergence Divergence (MACD) oscillator in the lower panel is above the zero line but has crossed to the downside for a take profits sell signal.
In this three-year weekly bar chart of UTX, below, we can see how prices broke out to the upside in October after a lengthy consolidation pattern. Prices are above the rising 40-week moving average line. The weekly OBV line has been rising since December 2018 but shows some weakness this past December and in January. Buyers are a little less aggressive. The MACD oscillator is in a bullish pattern but the two moving averages that make up this indicator are narrowing, which suggests the strength of the uptrend is fading.
In this Point and Figure chart of UTX, below, we can see a potential upside price target in the $170 area.
Bottom line strategy: The market is a discounting mechanism and I always find it interesting when a stock rises in the face of what seems to be bearish news. If you want to trade UTX from the long side I suggest risking below $145 while looking for potential gains to the $170 area.