For his second "Executive Decision" segment of Mad Money Tuesday night, Jim Cramer welcomed back Carol Tome, CEO of United Parcel Service (UPS) , to discuss the company's earnings and outlook as well as the stock's 7% decline Tuesday.
Tome said that e-commerce is clearly here to stay and the way consumers shop has changed forever. However, the rate of growth this year is not the same as it was last year.
Despite the slowdown, UPS continues to make progress, leaning into the needs of small and medium-sized businesses which value the services only UPS can provide. Small packages continue to be a growth market for UPS, Tome added.
The company remains on track to deliver 12% operating margins by 2023 and, beginning at the end of 2021, UPS will return 50% of their earnings to shareholders.
Cramer said all of these positives were completely lost on investors during Tuesday's session.
Let's check and see what the charts and indicators look like.
The charts looked a lot more positive back on April 28 where we wrote that, "UPS has strong charts, indicators and now a quantitative buy recommendation. Traders could probe the long side of UPS closer to $190 if available. Risk to $180. Our next price targets are $225 and $238."
In the updated daily bar chart of UPS, below, we can see a large island reversal pattern. Prices gapped higher in late April and then traded sideways to lower until Tuesday's downside price gap. The sideways trading looks like an island (use your imagination) separated from the rest of the chart by gaps. The 50-day moving average line is turning lower and the rising 200-day moving average line is not far below the market around $180.
The On-Balance-Volume (OBV) line shows a decline from early May telling us that traders have been more aggressive sellers of UPS. The Moving Average Convergence Divergence (MACD) oscillator is only slightly above the zero line and thus very close to an outright sell signal.
In the weekly Japanese candlestick chart of UPS, below, the daily price gap disappears because of the way the chart is constructed. What does not disappear is the sharp decline. The rising 40-week moving average line now intersects around $181 and could be tested in the days and weeks ahead.
The OBV line is showing some weakness the past three months. The MACD oscillator just crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of UPS, below, we can see a potential downside price target in the $168 area. This suggests we could see UPS retest a major support zone in the $175-$155 area.
Bottom-line strategy: If you are long UPS from around $190 and have not been stopped out I would sell that position. Prices are weak and likely to fall further. Stand aside from the long side for now.