In his third "Executive Decision" segment of Mad Money Friday evening, Jim Cramer spoke with Rajiv Ramaswami, president and CEO of cloud software provider Nutanix (NTNX) .
Ramaswami said that Nutanix addresses the two key concerns of companies today, digitization and dealing with a remote workforce. The company's virtual desktops and cloud platforms are perfect solutions for both of these needs.
When asked about investors' concerns over the company's revenues, Ramaswami explained that like many other companies, including Adobe Systems (ADBE) , Nutanix is transitioning from selling hardware appliances to subscription software. As their renewal business kicks in, revenues will return the company to growth.
Finally, when asked about the red-hot topic of security, Ramaswami noted that Nutanix is constantly building new security features into their products. Some of their latest offerings help detect and stop ransomware attacks.
The last time we reviewed the charts of NTNX was back on August 2, 2019 where we wrote "With more risk on the downside ($13) than potential on the upside ($22-$23) I would not look to be a buyer of NTNX."
Prices reached our downside price target in the $13 area in March 2020 and subsequently rallied back to the $35 area before turning lower again. Let's check out the charts again.
In this updated daily bar chart of NTNX, below, we can see that prices made a recovery in the past 12 months as prices nearly tripled from their March nadir. NTNX has broken down below the cresting 50-day moving average line and fell further to test the 200-day moving average line late last week.
The On-Balance-Volume (OBV) line has weakened from late December and tells us that sellers of NTNX have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator has weakened from late December and moved below the zero line last week for an outright sell signal.
In this weekly bar chart of NTNX, below, we can see that prices broke a longer-term downtrend and rallied to chart resistance in the $35 area. Prices turned lower in February and have tested the rising 40-week moving average line.
The weekly OBV line shows weakness from December and the MACD oscillator has crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of NTNX, below, we can see that prices reached and exceeded a downside price target in the $31 area.
In this weekly Point and Figure chart of NTNX, below, we can see that the software is projecting a potential target in the $16 area.
Bottom line strategy: NTNX probably finds buying support in the $24-$20 area but I would not be in a rush to become a buyer.
