The computer networking products company Mellanox Technologies (MLNX) was upgraded today to a buy by TheStreet's Quant Ratings service. Regular readers of Kamich's Korner on Real Money know that I like to combine the technical approach and the quantitative approach to narrow down the search for investment ideas. Let's check out the charts and indicators for MLNX.
In this daily bar chart of MLNX, below, you can see that the stock broke out on the upside in November after a six-month consolidation pattern. Prices turned north and the 50-day moving average line crossed above the 200-day line in late November generating was is commonly called a bullish golden cross. MLNX is still pointed up and remains above the rising 50-day moving average line and the rising 200-day line.
The daily On-Balance-Volume (OBV) line has been going up and up since November telling us that buyers of MLNX have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator just turned up again this month to a fresh outright go long signal.
In this weekly bar chart of MLNX, below, we can see that the sideways consolidation pattern on the daily bar chart (above) was actually much bigger and goes back to the middle of 2015. Prices have largely traded sideways around $45 so a doubling of the price to $90 or even a tripling to $135 is possible. MLNX is above the rising 40-week moving average line. The weekly OBV line has a general positive slope and the MACD oscillator on this long time frame is clearly bullish.
In this Point and Figure chart of MLNX, below, we can see a fresh breakout at $77.49 and an upside price target of $97.52 which is close enough to round up to $100.
Bottom line: A quantitative upgrade to buy and strong charts and indicators should be a winning combination. Traders should look to buy MLNX in the $80-$75 area risking below $70. $90, $100 and then $135 are my upside price targets.