In his "Homework" segment of Mad Money Tuesday night, Jim Cramer followed up on a few stocks that had stumped him during earlier shows. Cramer checked up on Niu Technologies (NIU) , the electric bicycle and scooter maker that's also been red-hot in recent months. With the shares up big for the year, Cramer said he simply cannot recommend the stock given that the company missed earnings by a mile.
Let's check out the NIU charts.
In the daily Japanese candlestick chart of NIU, below, we can see that the shares have soared dramatically higher from the $6 area back in March and April to $37 recently. We see a number of upper shadows this month and many red candles which happens when prices close below the opening. The 50-day and 200-day moving average lines are pointed upward but we know they are lagging indicators.
The On-Balance-Volume (OBV) line looks like it is turning lower and changing from aggressive buying to aggressive selling. The 12-day price momentum study shows a lower high from October to November for a bearish divergence when compared to the price action. A bearish divergence is not a clear cut sell signal but it is a heads up that the pace of the rally has slowed. This can foreshadow a correction.
In this daily Point and Figure chart of NIU, below, we can see a potential downside price target in the $25 area. A decline to $25 could mean we decline even further to the $20 area.
Bottom-line strategy: I believe in sliced bread and I also believe that when a stock chart has signaled a decline I do not want to fight the tape. Avoid the long side of NIU.