In his second "Executive Decision" segment of Wednesday's Mad Money program, Jim Cramer spoke with Rick Hume, CEO of Tech Data Corp. (TECD) , the technology supplier with shares up 15% in just the past month.
Hume said there's always something hot in technology, which is why Tech Data diversifies in many areas both geographically, and also with its product portfolio and customer base. The company sells components from everything from PCs to data centers, and sells them to over 125,000 mostly small and mid-size customers.
Hume said the world is only in the second or third inning of the digital transformation and when you add the 5G wireless roll out, there is a lot of exciting new technology on the way.
Let's see if the charts are exciting too.
In the daily bar chart of TECD, below, we can see some interesting bullish developments. TECD trades sideways from January between $90 on the downside and the $110 area on the upside. In August the bottom end of the trading range breaks temporarily with a slide to around $80. Prices gap to the upside in late August to make the decline look like an aberration.
Trading volume does not increase significantly on the August decline and the On-Balance-Volume (OBV) line stays pretty steady in August and then turns higher this month, suggesting that investors held their positions. The Moving Average Convergence Divergence (MACD) oscillator makes a similar decline in August and recovery in September.
In the weekly bar chart of TECD, below, we can see a possible or potential large inverse head-and-shoulders continuation pattern. The neckline is across the $110 area. There are left shoulders in 2017 and 2018. The head is around the fourth quarter of 2018 and the right shoulder was just made in August. Prices are above the rising 40-week moving average line.
The weekly OBV line moves with the price action and the line is close to making a new high for the move up. The MACD oscillator is crossing to the upside for a new outright go long signal.
In this Point and Figure chart of TECD, below, we can see a possible upside price target around $137. A trade at $111.98 will be a breakout on this chart.
Bottom-line strategy: A lot of investors make fun of chart patterns but they are the oldest form of investment analysis and the pattern on TECD is potentially very bullish. Traders could go long above $112. Use a reasonable stop and look for targets of $137 and then $180 based on this pattern.
