RV-maker Thor Industries (THO) isn't getting much love from Wall Street, despite reporting a "mammoth earnings beat" on Monday and providing "very strong guidance," Jim Cramer said as he welcomed Bob Martin, president and CEO of Thor to Mad Money Tuesday night.
The company has a high-quality problem, which is high demand but not enough products for its customers. Thor is ramping up production and working through supply issues to get caught up on demand, Martin said. The company faces a record backlog of orders and inventory levels lower than he's ever seen. The European business is having a similar experience.
RVs tend to be a leading indicator for recessions, however, Thor's business isn't exactly flashing warning signs. Instead, more remote workers, first-time buyers and a wide demographic of young and older customers are driving strong business, Martin said.
Let's check and see if the charts agree.
In the daily bar chart of THO, below, we can see that the shares made a small lopsided double top in June and late July/early August. Prices have declined below the July low and established a short-term downtrend -- lower lows and lower highs. THO is trading below the declining 50-day moving average line and above the rising 200-day moving average line.
The On-Balance-Volume (OBV) line has drifted lower from June telling observers that sellers of THO are more aggressive. There is some slight improvement in the OBV line this month. The Moving Average Convergence Divergence (MACD) oscillator is poised for a cover shorts buy signal.
In the weekly bar chart of THO, below, we can see that prices have pulled back the past two months but remain above the rising 40-week moving average line.
The weekly trading volume has been steady this year while the OBV line moved up from March to late July before weakening. The MACD oscillator has crossed to the downside for a take profits sell signal.
In this daily Point and Figure chart of THO, below, the software is projecting a potential upside price target in the $119 area.
The weekly Point and Figure chart of THO, below, is projecting a downside price target in the $61 area. A big difference from the daily chart above.
Bottom-line strategy: The last time we reviewed the charts of THO was back on June 9 when we said, "THO could travel further on the upside but right now prices are extended (overbought if you will) and a sideways to lower correction is likely to unfold before further gains. A pullback to around $90 would not be unusual and likely a better buying opportunity. Risk a close below $84 if you decide to go long."
Prices did indeed correct to $90 but signs of renewed buying have not developed and further declines could be seen in the weeks ahead. Avoid the long side for now.