During the fast-paced Lightning Round segment of Mad Money Thursday night one caller asked Jim Cramer about Ericsson (ERIC) . "No. You want Marvell Technology Group Ltd. (MRVL) ," was Cramer's reply.
Let's check out the charts of Action Alerts PLUS holding MRVL.
In the daily bar chart of MRVL, below, we can see that the shares have more than doubled from their March nadir. Beneath the surface there are some technical clues that say that this stock advance is tiring. Prices are above the cresting 50-day moving average line and we could soon see a close below the line.
The trading volume has been declining from March instead of expanding. The On-Balance-Volume (OBV) line is up from its late February low but it has not kept pace with the price gains. Buyers are more aggressive but we could see a strong performance from the OBV line.
The Moving Average Convergence Divergence (MACD) oscillator shows a peak back in June and a much lower high currently even though prices are at a higher level. This is a bearish divergence and suggests the rally is losing "steam".
In the weekly bar chart of MRVL, below, we see a mixed picture. Prices are still in an uptrend above the rising 40-week moving average line but upside progress has stalled recently.
The weekly OBV line has not confirmed the price action and is a big bearish divergence and concern for longs, in my opinion. The MACD oscillator has narrowed and looks vulnerable to a turn lower.
In the daily Point and Figure chart of MRVL, below, we can see a downside price target in the $34 area.
In this weekly Point and Figure chart of MRVL, below, we can see a possible longer-term price target of $57.
Bottom-line strategy: Even though we have a potential price target of $57 for MRVL we have to get there from here. I see the risk of a downward correction before the rally resumes.
(Marvell Technology is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells MRVL? Learn more now.)
