In the Lightning Round of Mad Money Tuesday night, our own Jim Cramer talked to one caller about Cypress Semiconductor Corp. (CY) , saying: "I think the stock can go higher. It's incredibly cheap. Let's do some buying." Now let's take a couple of minutes to look at the charts before we do some buying and let's have a strategy that balances reward and risk.
In this daily bar chart of CY, below, we can see three trends: a sideways trend from February to early August; a downtrend from early August to late October; and another sideways or basing trend from October. CY has made a possible small double-bottom pattern since October and prices just broke above the early December high. Volume did expand a bit in the past week and CY is now above the rising 50-day moving average line.
Speaking of moving averages, CY is testing the underside of the declining 200-day moving average line and maybe we can see a close above that longer-term indicator. The daily On-Balance-Volume (OBV) line shows a positive trend for the past year, but it has been stalled in a neutral trend for several months. The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed the zero line last month for an outright go-long signal.
In this weekly bar chart of CY, below, we can see positive developments. Prices are testing the declining 40-week moving average lines. The weekly OBV line shows some improvement from December and the MACD oscillator has crossed to a cover-shorts buy signal.
In this Point and Figure chart of CY, below, we can see the double-bottom pattern noted on the daily bar chart (above). There is an upside price target of $15.77 being projected.
Bottom line strategy: The charts of CY look better than they have in several months, but I think the recent potential base needs to be retested. I would look for CY to pull back to retest the $14.00-$13.75 area. If the retest is only light volume and does not break the rising 50-day average, I could become a buyer.
