For his final Executive Decision segment of Tuesday's "Mad Money" program, Jim Cramer checked in Mat Ishbia, chairman and CEO of UWM Holdings (UWMC) , a loan originator.
UWM posted mixed second-quarter results. It saw closed loan volume soar 90% over a year ago, but also saw its gross margins collapse. Shares of UWM currently yield 5.5%.
Ishbia said he was very happy with UWM's quarterly results, which exceeded its second-quarter guidance. As for those falling gross margins, he said "we knew this would happen" and engineered the move lower.
UWM is the low-cost leader, Ishbia added, which means the company can afford to lower prices in order to gain market share.
We looked at the chart of UWMC on June 14 and wrote at that time, "Prices made a low in early May and have improved. There is a weekly Point and Figure target of $14 or so but I don't think this is a good use of your trading capital."
Let's check to see if there has been any improvement.
In this daily bar chart of UWMC, below, we can see that the May-June rally fizzled out around $11. Prices sank from June to August and are trading below the declining 50- and 200-day moving average lines. The On-Balance-Volume (OBV) line has been in a downtrend since June and tells us that sellers of UWMC have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator has been below the zero line since early July even after a cover shorts buy signal last month.
In this weekly Japanese candlestick chart of UWMC, below, we can see that traders rejected the prices below $7 in May and are trying the same thing this month. Prices are below the declining 40-week moving average line. The weekly OBV line is pointed down and the MACD oscillator is bearish.
In this daily Point and Figure chart of UWMC, below, we can see that prices are pointed down with a $7 target. It might take a rally to $8 to improve this chart.
Bottom line strategy: The charts and indicators of UWMC are not appealing. Avoid the long side of UWMC and wait for clean signs of a bottom. A couple closes above $8 would be a move in the right direction.
