The company by the name of Ericsson Telephone Co. (ERIC) came up in Mad Money last night. Jim Cramer noted that investors can rack up significant gains by finding a long-term theme and getting in early. Three weeks ago, Cramer highlighted ERIC as one of two big winners in the telco equipment space.
Let's check out the charts and indicators.
In the daily bar chart of ERIC, below, we can see the rally in the price of ERIC over the past 12 months. The rally began with a strong upside gap back in April. Prices made a new high for the move up this month and are positioned above the rising 50-day moving average line and the rising 200-day line.
The daily On-Balance-Volume (OBV) line shows a matching rise from April, and it broke out to a new high slightly ahead of the price action. The 12-day price momentum study in the lower panel is not showing us a bearish divergence, so that is one less worry for traders.
In the weekly chart of ERIC, below, we can see that prices have been moving up from a 2016 low. Prices are above the rising 40-week moving average line. The weekly OBV line does show a rise from late 2016 to the middle of 2017, but since then it has been largely featureless.
In the bottom panel is the 12-week price momentum study. Momentum has been slowly weakening since the middle of 2018. These lower momentum peaks are a bearish divergence when compared to the price action. Momentum is a leading indicator and it often peaks and weakens before prices turn lower.
In this Point and Figure chart of ERIC, below, we can see an upside price target of $10.53.
Bottom-line strategy: Patient investors could stay long ERIC looking for gains to the $10.50 area in the weeks ahead, but stay alert if momentum slows further.
