Don't take your cues from the disappointing outlook at SAP SE (SAP) , Jim Cramer cautioned viewers of his Mad Money program Monday night. The digitization trend is alive and well, he said, and the cloud seems to be only passing over SAP, but not SAP's competition, where sales are booming.
Let's check out the charts of SAP.
In this daily bar chart of SAP, below, we can see that prices made a huge downside price gap Monday. SAP gapped way below the rising 200-day moving average line. Prices have been under the declining 50-day moving average line since late September so the selloff should not have been a total surprise. Trading volume was very heavy yesterday as traders voted with their feet.
The On-Balance-Volume (OBV) line moved sharply lower yesterday continuing a decline that started in late July.
The Moving Average Convergence Divergence (MACD) oscillator fell below the zero line for a sell signal in September.
In this weekly bar chart of SAP, below, we see a bearish picture. Prices are well below the declining 40-week moving average line.
The weekly OBV line has turned down sharply after failing to make a new high like prices did this summer.
The MACD oscillator gave a take profits sell signal last month.
In this daily Point and Figure chart of SAP, below, we can see the "O's" filled in as if prices had traded there. The software is projecting a potential downside price target in the $70 area.
Bottom line strategy: It's very hard for a stock to recover after the bruising that SAP took yesterday. Prices could bounce temporarily but the risk is for further declines as investors find better opportunities elsewhere.
