On Mad Money's "Executive Decision" segment Friday, host Jim Cramer talked with Doug Merritt, president and CEO of Splunk Inc. (SPLK) . The stock slipped after a mixed earnings report and guidance that some found uninspiring, leaving some investors to wonder whether Splunk is a buying opportunity.
"This is a snap decision," Cramer said of the sellers. This was a great quarter and the guidance was strong, in his view. There will be tough days, but secular growth themes will remain in play.
Let's check out the charts of SPLK right now.
In the daily bar chart of SPLK, below, we can see that prices had dropped about $50 in the past several sessions. Prices quickly dropped below the cresting 50-day moving average line and even below the rising 200-day line. Buying interest has appeared at the top end of a potential support area beginning around $125.
The daily On-Balance-Volume (OBV) line was rising but now shows a small peak in the middle of February suggesting that sellers of SPLK had become more aggressive. The Moving Average Convergence Divergence (MACD) oscillator crossed to the downside in December and crossed below the zero line recently for an outright sell signal.
In the weekly bar chart of SPLK, below, we can see that prices have tested the rising 40-week moving average line. A weekly close above $135 is needed so the 40-week average line is not broken.
The weekly OBV line worked lower in February telling us that sellers of SPLK were more aggressive. The MACD oscillator just crossed to a take profits sell mode.
In this daily Point and Figure chart of SPLK, below, we can see that prices reached and exceeded a downside price target. Support in the low $120s can be seen.
Bottom-line strategy: During a market selloff it can be useful to find stocks that are leading the broader market or bottoming before the major averages. This can be the next leadership. I think SPLK could soon stabilize.