In another Executive Decision segment of "Mad Money" Tuesday, Jim Cramer checked in with Phil Gallagher, CEO of Avnet Inc. (AVT) , an electronic components supplier.
Gallagher said a combination of increased demand coupled with COVID-induced supply disruptions have created incredibly complex supply chain issues for companies. It only takes one part to disrupt an entire assembly line, Gallagher noted, and some components are now seeing lead times of up to 40 to 50 weeks.
When asked if component suppliers are ramping up to meet the challenge, Gallagher said many factories are indeed running 24 hours a day and many others are making big investments to expand their capacity.
Let's check out the charts and indicators of Avnet.
In this daily bar chart of AVT, below, we can see that prices corrected lower from May to October. Prices have rallied above the flat 50-day moving average line and are testing the underside of the 200-day line. The On-Balance-Volume (OBV) line made a low in the middle of September and has improved slightly from there, telling us of a shift to aggressive buying from aggressive selling. The 12-day price momentum study shows higher lows from June to September, telling us that the pace of the decline has slowed, which is a bullish divergence when compared to the price action. This divergence can foreshadow higher prices ahead.
In this weekly Japanese candlestick chart of AVT, below, we see an improving picture. Prices have rallied to the underside of the 40-week moving average line and it will not take much strength to break above it. The OBV line shows a rise the past two months and the Moving Average Convergence Divergence (MACD) oscillator is ready to cross to the upside for a cover shorts and new outright buy signal.
In this daily Point and Figure chart of AVT, below, we can see a potential upside price target of $46.
In this weekly Point and Figure chart of AVT, below, we used a five-box reversal filter. Here the software tells us that $56 is a possible price target.
Bottom line strategy: Traders could go long AVT in the $40-$38 area, risking $35. Our price targets for 2022 are $46 and then $56.
