For his second Executive Decision segment of "Mad Money" Monday, Jim Cramer spoke with Sanjay Poonan, COO of VMware (VMW) , a cloud software provider.
Poonan said while VMware may not have been top of mind for investors in 2020, it's still a vital component of cloud infrastructure. He said the cloud represents a $120 billion opportunity and is expected to grow 35%.
When asked about the huge SolarWinds cyberattack, Poonan said this breach has only heightened the need for cybersecurity, which is why VMware continues to promote basic "cyber hygiene" that every company can do to begin the journey toward making the Internet more secure.
We last looked at VMware on Oct. 15 of last year, when we wrote, "In the short run VMW could get dragged lower with weakness in the broad market. Traders could look to go long VMW around $150 if they are prepared to risk a close below $135. Renewed strength may not appear until closer to year-end." Let's check and see how that played out.
In this updated daily bar chart of VMW, below, we can see that prices pulled back deeper and faster than anticipated. Traders should have been stopped out with a loss by the end of the month -- not my best work. VMW currently is trading below the declining 50-day moving average line and below the still-rising 200-day line. The On-Balance-Volume (OBV) shows a decline from the middle of October, telling us that sellers of VMW were more aggressive heading into year-end. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line now for a sell signal after hugging the zero line for much of December.
In this weekly bar chart of VMW, below, we can see a weakening pattern since early 2019. Prices are trading around the cresting 40-week moving average line. The weekly OBV line has largely been weak since early 2019 and suggests long-term liquidation (selling). The MACD oscillator has been weak since August.
In this daily Point and Figure chart of VMW, below, we can see a potential downside price target in the $125 area.
In this weekly Point and Figure chart of VMW, below, we can see a price target in the $97 area.
Bottom line strategy: The charts and indicators of VMW suggest further declines in the first quarter of 2021. Avoid the long side.