When speculative stocks make big moves to the upside, the prudent thing to do is take some profits, Jim Cramer reminded viewers during Friday night's "Mad Money" program. A win is only a win when you sell, so take profits when you have them.
Case in point: Arrowhead Pharmaceuticals (ARWR) which is up 411% in 2019 and 133% in just the past six months. Cramer said he's still a big fan of Arrowhead and its technology that silences the genes that cause disease. But while the stock has more room to run, investors with huge gains must take some of their gains off the table. Let's check out the latest charts and indicators.
In this daily bar chart of ARWR, below, we can see that prices had a huge run this year from around $15 to near $75 from February to late November. Impressive.
Prices are well above the rising 50-day moving average line and well above the rising 200-day line. You could consider prices extended vs. these two popular moving averages. The daily volume histogram shows rising volume the past year and the daily On-Balance-Volume (OBV) line shows a bullish pattern until late November and then some weakness which could be profit taking and liquidation when you consider how far prices have traveled in just this year.
Prices have been trading sideways around $65 the past month and the 12-day price momentum study shows that price momentum has been weakening. We do not see a bearish divergence between price and momentum, but with momentum weakening we are on alert for a correction.
In this weekly bar chart of ARWR, below, we can see that prices have soared the past three years from single digits to short of $75. A huge rally that says one needs to nail down some serious profits. Prices are extended above the rising 40-week moving average line. The weekly OBV line shows a peak in late November and its December decline is a hint that sellers have now become more aggressive. The 12-week price momentum study is turning down so the "glow is off" the rally and this is another signal to book profits.
In this Point and Figure chart of ARWR, below, we can see a nearby downside price target around $60, which is not so bearish. But there is no nearby support below here to suggest that $60 will in fact hold. The risk is for a deeper decline.
Bottom line strategy: Jim Cramer's suggestion to nail down profits on ARWR makes perfect sense when I look at the charts and indicators. Pull the trigger.