In his first "Executive Decision" segment of Mad Money Tuesday night, Jim Cramer spoke with Dan Rosensweig, co-CEO of Chegg Inc. (CHGG) , the digital learning platform with shares up 32% over the past month.
Rosensweig said that Chegg has always believed that students would increasingly move online for their studies. Because they own the entire process, they can make classes more personal and more relevant to students and are able to respond quickly to changing market conditions.
When asked how colleges will cope in the fall, Rosensweig said each school is preparing differently. He said classes need to resume, and that might mean online first and on campus later on in the year or it might mean a hybrid model with a limited number of students.
Let's check out the charts of CHGG (as part of Fin 4775 Technical Analysis at Baruch College).
In the daily bar chart of CHGG, below, we can see that prices made a huge gap to the upside on extremely heavy volume Tuesday. Prices made a good-sized high/low range for the day so there was profit-taking and trading during the day. This kind of action allows for some traders to take profits and others to enter with new long positions. This is positive and the big range can mean that over the next several days we can see some sideways trading.
The slopes of both the 50-day and the 200-day moving averages are turning positive. The daily On-Balance-Volume (OBV) line sprinted to a new high for the move up and tells us that buyers were very aggressive. The Moving Average Convergence Divergence (MACD) oscillator pushed further into bullish territory above the zero line.
In the weekly bar chart of CHGG, below, we can see that Tuesday's breakout was from a 15-month consolidation pattern. Prices have already reached their expected bar chart price target of $60 measured by taking the height of the pattern ($15) and adding it to the breakout at $45.
All the indicators are turning up -- the 40-week moving average line, the weekly OBV line and the MACD oscillator.
In this first Point and Figure chart of CHGG, below, we used daily price data. Here the chart shows the rally without the price gap. A price target of $54 was reached and exceeded.
In this second Point and Figure chart of CHGG, below, we used weekly close-only price data to allow for a longer-term target. Here we can see a price projection of $103. Learning fast.
Bottom-line strategy: The charts and indicators of CHGG tell us that this rally has further to go. Aggressive traders should use any available sideways price action the next few days to build a long position. You may have to risk to $50 until we see more price activity to judge where the buyers are coming in. The $105 area is our price target.
