In a raging bull market, stocks that are in motion tend to stay in motion, Cramer told viewers of Monday's Mad Money program, and just like Newton's first law, stocks that are heading higher tend to keep heading higher.
Cramer said shares of Novavax (NVAX) continue to rocket higher on no news. The stock has soared 4,385% so far this year, despite the fact that this company has never successfully brought a vaccine to market. Then there's Sorrento Therapeutics Inc. (SRNE) , the early-stage biotech that's up 537% over the past six months on the promise of its COVID-19 test.
Let's check out the charts of SRNE.
In this daily Japanese candlestick chart of SRNE, below, we can see the explosive upside move that appears to have come out of nowhere. Prices were trading sideways around $2 -- and then in the middle of May, we can see a gap to the upside. Prices spiked higher for just two days and then slowly gave back most of the gains over the next several days.
Another round of buying came in early June and pushed prices briefly up over $18. The two-day candle pattern now looks like a harami reversal, but will need bearish confirmation tomorrow. With huge gains for early buyers, the odds of heavy profit taking are higher. SRNE is extended above the rising 50-day moving average line and the rising 200-day moving average line.
The daily On-Balance-Volume (OBV) line shows a lot of aggressive buying since May, but it may have made a short-term peak. The 12-day price momentum study does not show us a bearish divergence yet, but we may have seen a peak in upside acceleration.
In this weekly bar chart of SRNE, below, we can see a different perspective on the price action. Here we can see that investors with vision could have bought all the shares of SRNE they would have wanted around $2. Trading volume was nearly invisible until recently and prices are up nearly 10-fold. The slope of the 40-week moving average line is positive. The OBV line is strong and the Moving Average Convergence Divergence oscillator is bullish.
In this Point and Figure chart of SRNE, below, we used daily price data. Prices have reached an exceeded the projected target of $15.87.
Bottom line strategy: A possible harami reversal on the candlestick chart and the first sign that trading volume could be increasing on a down day (a peak in the OBV line) suggest that short-term traders may want to nail down profits and trade more cautiously.