During the Mad Money Lightning Round Tuesday evening, here's what Jim Cramer had to say about one of the stocks that callers offered up, Applied Materials (AMAT) : "This is the stock to watch. They are geniuses. I think this stock makes a stand at $118," explained Cramer.
When we reviewed the charts of AMAT on April 8 we wrote that, "The charts of AMAT are getting a bit stretched on the upside, so I do not feel real confident about recommending new long positions here. Longs from lower levels should consider raising sell stop protection to $124."
Let's check out the charts again.
In the daily bar chart of AMAT, below, we can see that the shares have worked lower since our April review and into early May. Prices are testing the rising 50-day moving average line and are close to our recommended $124 stop level.
The On-Balance-Volume (OBV) line has been weakening from early April telling us that sellers of AMAT have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator is pointed down.
In the weekly Japanese candlestick chart of AMAT, below, we can see that the shares have staged a significant rally from its March 2020 low. The slope of the 40-week moving average line is positive.
The weekly OBV line shows a rising trend from late October but certainly not as robust a rally as we have seen in price. The MACD oscillator is still bullish but very likely to soon cross to the downside for a take profit sell signal.
In this daily Point and Figure chart of AMAT, below, we can see a potential downside price target in the $114 area. If prices declined that far it would trigger my suggested $124 stop and also break Jim Cramer's $118 area.
Bottom-line strategy: I have recommended a sell stop at $124 on AMAT and Jim Cramer told a Mad Money viewer that $118 needs to hold. Take your pick.