VMware Inc. VMW is a provider of cloud management and networking software that saw a sell side firm cut its fundamental opinion of the stock to "market perform" here on Wednesday. Separately, there are media reports that VMware did not get a rival offer during its "go shop period" in its sale to Broadcom AVGO. Let's see if the charts and technical indicators offer any clarity.
In this daily bar chart of VMW, below, we can see that prices gapped higher in May and rallied into early June before drifting lower the past four weeks. Prices briefly rallied above the 200-day moving average line but subsequently pulled back to test the 50-day moving average line. The On-Balance-Volume (OBV) line has slowly weakened from early June as traders switched from aggressive buying in May to aggressive selling in June. The Moving Average Convergence Divergence (MACD) oscillator is back below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of VMW, below, we can see some interesting clues. In May VMW made a large white or empty (bullish) candle. The middle of that candle should have acted as support but it failed -- not a positive sign. Prices have declined and are on the edge of pushing into the price gap from May. The Japanese approach to charting suggests that the gap (they call it a window) should act as support but weakness into the gap is possible. The trading volume was strong for only one week. The long term trend of the weekly OBV line is bearish. The MACD oscillator is still below the zero line.
In this daily Point and Figure chart of VMW, below, we can see a potential downside price target in the $104 area.
In this weekly Point and Figure chart of VMW, below, a price target of $104 is shown.
Bottom line strategy: I have no knowledge of what is being discussed in the boardrooms of VMW or AVGO nor do I know what government agencies may decide about this proposed acquisition. However, the charts suggest that the price of VMW could weaken.
