Dropbox Inc. (DBX) was mentioned during the fast-paced "Lightning Round" of Mad Money Tuesday night. Jim Cramer remained positive on the company saying that, "People didn't like the revenue guidance but I'm not backing away one bit."
Jim has confidence in the fundamental story, but I like to check the charts and indicators.
In the daily bar chart of DBX, below, we can see that we do not have that much price history to work with -- notice the short period of time for the 200-day moving average line. Prices declined from a spike rally in June to a low in December. The slope of the 50-day moving line was negative from August to late January. Prices are now above the rising 50-day moving average line but below the declining 200-day line. A rally and close above $27 would put DBX above both averages.
The volume pattern does not tell me much but the daily On-Balance-Volume (OBV) line has been improving from late December and is finally showing us some more aggressive action.
The daily Moving Average Convergence Divergence (MACD) oscillator moved above the zero line in January giving us an outright buy signal. Recently the MACD oscillator has rolled over to a take profits sell signal.
In this Point and Figure chart of DBX, below, we do not have any price targets but we can see what price points will be important. A trade at $27 will be a small double-top breakout and a trade at $28 will be a bigger double top breakout. A decline to $19.50 will weaken this chart.
Bottom-line strategy: I like to have a lot of price history to reach a trading decision. I have a limited picture with DBX but it has been improving from late December. Investors who can afford to risk below $20 can approach the long side of DBX slowly. Get more aggressive above $27 and above $28.