The fast-paced Lightning Round segment of "Mad Money" is a viewer favorite. Tuesday's edition did not disappoint with one caller asking about Snap Inc. (SNAP) , the company behind the Snapchat camera app that lets people communicate via short videos and images.
Jim Cramer did not hesitate to advise the caller "I'd take out your cost and let the rest run."
Let's check out the charts of SNAP.
In this daily bar chart of SNAP, below, we can see some technical clues that are not positive. Prices gapped higher in late October on heavy turnover. SNAP continued to work higher into November but the volume declined sharply and the On-Balance-Volume (OBV) line struggled to move higher. A stock pushing up to new highs should attract more volume and buyers, but that does not look like the case for SNAP. Prices are trading above the rising 50-day moving average line but are twice the level of the rising 200-day moving average line and thus should be considered extended or overbought. The Moving Average Convergence Divergence (MACD) oscillator crossed to the downside in early November, generating a take profits sell signal.
In this weekly bar chart of SNAP, below, we can see the start of some weakness. Prices are still in an uptrend but are at the widest point over the 40-week moving average line that we've seen in the past three years. The weekly OBV line has not kept up with the price movement and is a bearish divergence as prices made a new high but the OBV line did not. The Moving Average Convergence Divergence (MACD) oscillator is still bullish but it has begun to narrow, and that can be the first sign of possible weakness ahead.
In this weekly Japanese candlestick chart of SNAP, below, we can see some potential reversal patterns, including a hanging man pattern in November with bearish confirmation last week. This is a potential top reversal pattern.
In this daily Point and Figure chart of SNAP, below, we can see a potential nearby price target of $49. This could be a case of more risk than reward.
Bottom line strategy: These four charts of SNAP suggest that SNAP could weaken in the weeks ahead. Cramer's advice of taking out your cost basis looks like a timely suggestion.
