One caller during the Lightning Round of the "Mad Money" program Monday inquired about PayPal Holdings Inc. (PYPL) : "PayPal is up a lot," noted Jim Cramer. Let's check out the charts and indicators here on Tuesday morning.
In this daily bar chart of PYPL, below, we can see a strong rally from late December. Prices are above the rising 50-day simple moving average line and well above the rising 200-day line. Trading volume looks like it has been shrinking since February, but the daily On-Balance-Volume (OBV) line shows a rise from October and should support the bull case with its signal of aggressive buying. The 12-day price momentum study is the rub here; momentum has been weakening since January with lower highs, and that is a bearish divergence when compared to the price action making higher highs. Divergences are very imprecise timing tools, but that doesn't mean we should ignore them.
In this weekly bar chart of PYPL, below, we can see more reasons to be cautious of the long side of PYPL. Prices have had a huge rally the past three years so we have profits that have been built up, or we have something to potentially reverse. Prices are extended above the rising 40-week moving average line like they were in late 2017 when they corrected. The weekly OBV line has just made a new high for the move up, just barely (and finally) confirming the new price highs. The weekly Moving Average Convergence Divergence (MACD) oscillator is pointed up and well above the zero line, but it has been narrowing toward a possible take-profits sell signal.
In this Point and Figure chart of PYPL, below, we can see an upside price target of $123 projected -- not all that far above the market.
Bottom line strategy: I believe there are two ways to take profits. One way is on strength around or toward a price target (fundamental or technical) and the other way is on a sell stop when support is broken. For PYPL I would suggest taking some profits on strength above $120 and the balance on weakness below $105.