During Monday night's Mad Money program on CNBC, Jim Cramer talked about investing in red-hot IPOs. You should be prepared for many of your earning gains to be fleeting, Cramer told viewers. But over the long term, you may still have picked some winners, as he demonstrated with some recent recommendations.
One name he mentioned was Tencent Music Entertainment Group (TME) . This stock is up 34% from when Cramer recommended it in November. He said while he still likes the story, you can't blame anyone for taking some profits.
Let's see how the charts and indicators look today.
In this daily bar chart of TME, below, we can see the entire trading history of this new issue. With limited history, I shorted the moving average to 20-day and 50-days from my normal 50-day and 200-day selection.
TME is on an uptrend and is trading above the rising 20-day and the bullish 50-day average lines.
The daily On-Balance-Volume (OBV) has been rising from early in the calendar year. The OBV line has dipped slightly in recent days, but this doesn't look like a problem for the bulls.
The daily Moving Average Convergence Divergence (MACD) oscillator is above the zero line in bullish territory, but the two moving averages that comprise this indicator have narrowed and may (or may not) cross to a take-profits sell signal.
In this Point and Figure chart of TME, below, we can see a minor, nearby downside price target of $17.68 and that a trade above $18.86 should be bullish.
Bottom line strategy: If you bought TME back in November or December, I have no problem with you taking profits. It is nice to ring the cash register, but the chart is still pointed up and we might see further gains this month. A close below $17 would be my signal to exit.