During Tuesday night's "Lightning Round" segment of Jim Cramer's Mad Money program, one caller asked about RingCentral (RNG) : "I think RingCentral is terrific," said Cramer.
Prices have rallied strongly the past three years but in this fast changing market environment we cannot become complacent. Let's check out the charts and indicators.
In this daily bar chart of RNG, below, we can see that prices have maintained an uptrend for at least the past 12 months. The February/March decline broke support from November/December and challenged the 200-day moving average line, but prices quickly recovered and went on to make new highs. If you look closely at Monday's price action you should see a large outside day and lower close.
This is a "near reversal" and the price action in the days ahead needs to be watched closely. Renewed price strength can refresh the uptrend but further weakness can be an issue. Prices are still well above the rising 50-day moving average line and the rising 200-day moving average line.
The daily On-Balance-Volume (OBV) line has made a new high to confirm the price gains.
The Moving Average Convergence Divergence (MACD) oscillator is in a bullish mode above the zero line, but the two moving averages that make up this indicator have narrowed recently which tells us that the strength of the trend is showing some weakness.
In this weekly bar chart of RNG, below, we can see the impressive rally the stock has made over the past three years. Unfortunately some bearish divergences are now showing their hand. Prices are above the rising 40-week moving average line and some analysts may say that prices are extended.
The weekly OBV line has not made a new high for the move up to confirm the new price highs made this month. This is a bearish divergence as prices did one thing while the indicator went in another direction.
The MACD oscillator is also likely to make another bearish divergence matching the highs of February while prices made new highs.
In this daily Point and Figure chart of RNG, below, we can see a potential upside price target of $430. The chart is vulnerable to a reversal or column of O's and at least a retest of the $250 area.
Bottom line strategy: I am not real bearish on RNG but its rally has discounted a lot of good news. Longs should consider nailing down some profits or raising their stop protection. This is not a bearish call on the stock but rather exercising some common sense based on some divergences from the indicators.
