In his first "Executive Decision" segment of Mad Money Friday evening, Jim Cramer spoke with Todd McKinnon, president and CEO of cybersecurity giant Okta (OKTA) along with Eugenio Pace, CEO of Auth0. Last week Okta announced it will be acquiring Auth0 in a deal worth $6.5 billion.
When asked why Okta needed to acquire Auth0, McKinnon explained that the companies are complimentary. He said the workforce identity market is worth $30 billion, but customer ID management, which is where Auth0 excels, adds an additional $25 billion.
You have to assume the bad guys are everywhere, McKinnon concluded, which is why the combination of Okta and Auth0 allows companies to authenticate every user, every machine and now every customer, quickly and securely.
We looked at the charts of OKTA back on Dec. 9 saying, "Yes, we know that prices have climbed to yet another new high but we also find bearish divergences on two time frames. The longer-term outlook for OKTA remains fine for now, however, the short-term picture remains problematic and vulnerable. I am certainly not a young investor so I would avoid the long side of OKTA into January and maybe February as the bearish divergences play out."
The shares have been weak in the past several weeks so let's review the charts again.
In the updated daily bar chart of OKTA, below, we can see how the shares have broken down below the now declining 50-day moving average line and below the cresting 200-day moving average line. Trading volume has surged recently and the daily On-Balance-Volume (OBV) line has made a new low for the move down telling us that sellers of OKTA have been more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator made a lower high in February when prices made a higher high and now this indicator has fallen below the zero line for an outright sell signal.
In the weekly bar chart of OKTA, below, we can see how prices have weakened. OKTA has broken below the cresting 40-week moving average line. The weekly OBV line has been in a decline from the middle of December.
The weekly MACD oscillator has crossed to the downside for a take profits sell signal.
In this daily Point and Figure chart of OKTA, below, we can see a straight down move of all "O's". A $117 downside price target is being projected.
In this weekly Point and Figure chart of OKTA, below, we can see a potential longer-term price target in the $103 area.
Bottom-line strategy: Yes, OKTA has made a good decline but the indicators and charts suggest further weakness is possible. Continue to avoid the long side of OKTA.