For his "Executive Decision" segment of "Mad Money" Tuesday, Jim Cramer spoke with Per-Olof Loof, CEO of Kemet Corp. (KEM) . Kemet is an electronic components maker that just posted an earnings beat of 26 cents a share that sent shares soaring 15.7% by the close Tuesday. Loof said Kemet is not a household name but is in every household, as its components are a part of just about every industry, from autos and the military to telecom and beyond. Loof said we're still in the very early innings of the digitization of our society and he sees growth for many years to come. The auto market is also growing for Kemet as cars with the latest technology use far more electronic components than their predecessors. Enough about the bright fundamental outlook; let's see what thousands of investors think about the stock by looking at the charts and indicators.
In this daily bar chart of KEM, below, we can see that prices rallied in May, June and July but have since given back all those gains and more. KEM rallied sharply this Monday and Tuesday but is still below the cresting 200-day moving average line and just closed above the declining 50-day moving average.
The On-Balance-Volume (OBV) line shows a zenith in July and a decline to late October. A weak OBV line happens when there is more volume traded on days when the stock closes lower. This is a sign of aggressive selling. The Moving Average Convergence Divergence (MACD) oscillator generated a cover-shorts buy signal in the middle of October, but it is still below the zero line for an outright go-long signal.
In this weekly bar chart of KEM, below, we can see some unusual movement and signals. Prices rallied from around $2 three years ago to touch $30 this year. Everyone needs that kind of out-performance in their portfolio. However, prices are below the flat 40-week moving average line and we can see that prices have rallied to the underside of that indicator. The weekly OBV line is disturbing in that it peaked in October 2017 and has declined since that high and signals long-term liquidation. The MACD oscillator shows a lower high this year than last year. The MACD oscillator currently is below the zero line for an outright sell signal on this time frame.
In this Point and Figure chart of KEM, below, we can see an upside price target of $27.50 being projected. This may be a tradeable rally, but it means that prices may not break out to new highs.
Bottom line strategy: With only a very small base pattern in October and a number of longer-term sell signals on the weekly chart, I am not expecting much on the upside for KEM.
