The Rally in American Superconductor Is Slowing: What to Do

The strength of the uptrend is waning.

During Monday's Mad Money program callers got a chance to quiz host Jim Cramer about stocks they were interested in. One caller asked Cramer about American Superconductor (AMSC) . "This is speculative but this one could work if speculative stocks keep working," responded Cramer.

Let's check out the charts of this energy technology company specializing in the design and manufacture of power systems and superconducting wire.

In the daily bar chart of AMSC, below, we can see that the shares emerged from a small base around $6 and soared to $30+ or a five-fold mark-up for early buyers. Prices have made a choppy pattern since late December with rallies and pullbacks. AMSC is trading modestly above the rising 50-day moving average line and above the rising 200-day moving average line.

The On-Balance-Volume (OBV) line is showing some weakness from early January suggesting that sellers are now the more aggressive traders of AMSC. The 12-day price momentum study shows lower highs in January telling us that the pace of the advance is slowing and this is a bearish divergence. 

 

In the weekly bar chart of AMSC, below, we can see some weakness in the indicators. The shares got to be extended above the rising 40-week moving average line when they got above $28 -- twice the level of the average line.

 

The weekly OBV line has struggled to make progress since December and the Moving Average Convergence Divergence (MACD) oscillator has been narrowing since early January and tells us that the strength of the uptrend is waning. 

 

 

 

In this daily Point and Figure chart of AMSC, below, we can see a potential upside price target in the $45 area. A decline to $23.02 is likely to weaken this chart.  

 

 

Bottom-line strategy: If I was long AMSC from lower levels I would take profits here because the daily and weekly bar charts are toppy looking.

 

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