• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

Red Hat Trades Ever Higher Despite the Indicators

Traders will need to be alert for a possible key reversal or a two-day reversal if overbought readings actually translate into a correction.
By BRUCE KAMICH
Oct 16, 2017 | 09:36 AM EDT
Stocks quotes in this article: RHT

We worried about the rally in Red Hat Inc. (RHT) at the end of September, and I recommended this strategy, "There are more technical reasons to be cautious on RHT than back in July. While I do not see a bearish top pattern, I would be more comfortable with just a small position -- maybe some at-the-money calls if I am wrong." So, with RHT rallying to a new high above $120, I have to admit that the trend has been more powerful and durable than the indicators suggested. (Jim Cramer also writes about Red Hat and other hot companies in his opener this morning.)

I tell my college students and regular readers of my "Korner" that no investment approach is 100% perfect. So it has been a couple weeks since we recommend selling down to a sleeping position; has anything changed with the charts and indicators? Let's check them out.

In this daily bar chart of RHT, above, we can see how prices tested the rising 50-day moving average line in March, May, June and August. There was just a shallow dip in late September that stopped short of a test of the 50-day line, showing to me that buyers of RHT were more aggressive in buying a partial pullback. Prices are above the rising 200-day average line, maybe too far above the line. The On-Balance-Volume (OBV) line recently made a new high for the move up, confirming the advance. The slow stochastic indicator (one of many measures of whether a market is overbought or oversold) is pinned to the top of the chart and tells traders who use this tool that prices have gone up too far and too fast. A sideways or lower correction is the way this kind or overbought condition is unwound.

Bottom line strategy: RHT has nearly doubled from its late 2016 nadir. Can prices continue to levitate higher? Sure. I underestimated the strength before. Maybe I have a fear of heights? Again, we do not have a distribution pattern, so traders will need to be alert for a possible key reversal or a two-day reversal if these overbought readings actually translate into a correction.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Investing | U.S. Equity | Technology | How-to | Risk Management | Stocks

More from Technology

Netflix Reports Earnings on Tuesday: 5 Important Things to Watch

Eric Jhonsa
Apr 17, 2021 8:00 AM EDT

Along with its total subscriber adds, keep an eye on Netflix's regional growth rates, as well as its free cash flow guidance and content spending outlook.

Taking Another Look at Twilio's Charts

Bruce Kamich
Apr 16, 2021 1:12 PM EDT

Aggressive traders could begin probing the long side of TWLO.

GE Isn't a Value Play and Has No Earnings Momentum - Buy Some Puts

Jim Collins
Apr 16, 2021 12:11 PM EDT

The company is in a secular downtrend fundamentally, but the stock has risen with the market in this wild ride over the past 12 months.

TSMC's Guidance Did Nothing to Spoil the Fun for Chip Stocks

Eric Jhonsa
Apr 15, 2021 4:20 PM EDT

Though the chip manufacturing giant is lower post-earnings, there's a lot to like about its revenue and capex guidance, as well as other commentary it shared.

Keysight Technologies: Bullish Fundamentals and Charts

Bruce Kamich
Apr 15, 2021 2:07 PM EDT

TK

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:05 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How recency bias and the Pareto Principle impact y...
  • 02:42 PM EDT PAUL PRICE

    Wednesday on Real Money Pro

    Make this stock a 'part' of your portfolio.
  • 04:44 PM EDT PAUL PRICE

    Pretty Incredible + Hard to Believe

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login