In his first "Executive Decision" segment of Wednesday night's Mad Money program, Jim Cramer spoke with John Riccitiello, CEO of Unity Software (U) , the gaming software engine that just completed its acquisition of special effects maker Weta Digital.
Riccitiello explained that Weta Digital is best known for its special effects work in the "Lord of the Rings" trilogy, but the company has an expansive set of digital tools. Their toolkit includes everything from world building to lighting to texturing of complex objects like hair and fur.
He added that as the computer becomes the primary tool used in film- and game-making, tools like those offered by Weta allow developers and artists to create things they never thought possible.
We looked at the charts of U on November 10 and recommended "U has reached and exceeded our $161 price target so I vote in favor of taking some money off the table. Raise stops on the remaining position to $141 from $115. The $206 is our next price objective."
Let's review the charts again.
In this daily bar chart of U, below, we can see two upward "spikes" above $200 in mid-November giving traders the opportunity to take profits at or above our $206 price target. Prices reversed direction and have sunk down to the 50-day moving average line. I do not anticipate that this indicator will provide much support.
The On-Balance-Volume (OBV) has turned lower from mid-November and tells us that traders turned to aggressive sellers from aggressive buyers. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside and is nearing the zero line.
In this weekly Japanese candlestick chart of U, below, we can see a top reversal pattern in November. The upper shadow above $200 tells us that traders rejected those levels. The weekly OBV line has turned lower and the MACD oscillator is narrowing - both signs of weakness.
In this daily Point and Figure chart of U, below, we can see that the software is now projecting a potential downside price target in the $133 area.
Bottom line strategy: Traders should focus on other stocks now. Stand aside and let U fall. If a new base develops we can take another look at some time.
