In the Executive Decision segment of Tuesday's "Mad Money" program, host Jim Cramer welcomed back Linda Rendle, CEO of Clorox Co. (CLX) , the consumer products maker.
Clorox shares dove 9.4% Tuesday after the company reported a big top- and bottom-line miss for its fiscal fourth quarter amid rising costs and wavering demand even as the world struggles to contain the Delta variant of the COVID virus. Rendle said after record quarters last year Clorox expected to see sales moderate. Looking at the year as a whole, however, all four of the company's segments posted double-digit sales growth significantly above pre-pandemic levels, she said.
Cramer said the next quarter will be a pivotal one for Clorox, one where we will learn what post-pandemic sales truly will look like.
Let's check and see what Clorox's charts look like.
In our review of June 30 we wrote, "CLX has not made a base pattern but it looks like it has made a low for now. Aggressive traders with patience could go long CLX at current levels, risking two consecutive closes below $170." With Tuesday's gap to the downside traders may still be long with a loss bigger than anticipated. Trade out of that position here on Wednesay.
In this daily bar chart of CLX, below, we can see that prices bounced from our June 30 recommendation but that price strength did not last long. The rebound stopped at the underside of the declining 200-day moving average line. It's a classic rally failure that I should have picked up on. Prices just held above the 50-day moving average line until Tuesday's gap to the downside. Trading volume soared as people voted with their feet. The On-Balance-Volume (OBV) line turned lower and the Moving Average Convergence Divergence (MACD) oscillator weakened.
In this weekly Japanese candlestick chart of CLX, below, we can see an upper shadow last month as prices rejected the rebound to the underside of the declining 40-week moving average line. It was a clear warning signal in hindsight. The OBV line is bearish and the MACD oscillator remains below the zero line.
In this daily Point and Figure chart of CLX, below, we can see the sharp decline. With Point and Figure charts the price gap gets filled in as if prices did trade at those levels. A downside price target of $134 is now projected.
Bottom line strategy: Traders who are still long CLX need to sell as best as possible before further losses pile up. Taking a loss is always a humbling experience and a reminder that risk is real and no investment approach is perfect.
