For his "Executive Decision" segment of Mad Money Tuesday night, our own Jim Cramer sat down with Sanjay Poonen, CEO of VMware Inc. VMW , the cloud computing virtualization provider.
Poonen explained that VMW is the de facto standard in private cloud virtualization, we find ourselves in a multi-cloud world that includes both public and private clouds, both on-premise and otherwise. Companies need a bridge to connect all of these clouds, he said. Let's check out the charts and indicators this morning.
In this daily bar chart of VMW, below, we can "see" what I think is an interesting chart pattern since August. The is a chart pattern called a "broadening formation" and it looks like a large triangle formation that starts at the apex and then makes wider and wider up and down swings. I can see higher highs on VMW in July, September and late November. Lower lows show up in late July, late October and early January. The pattern frustrates longs and shorts until the eventual breakout. Broadening patterns can be continuation patterns and we would look for new highs above $170 or they can be reversal patterns and then a move below $130 would be the risk. A move back above $155 should be an early signal that strength will win. The volume pattern does not show much and the daily On-Balance-Volume (OBV) line moves up and down with the price action. Recently the Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside from below the zero line for a cover shorts buy signal.
In this weekly bar chart of VMW, below, we can see the past three years of activity. The sideways action on the daily chart looks like a normal correction on this weekly scale. Prices are just below the rising 40-week moving average line. The weekly OBV line has been neutral/positive the past year and the MACD oscillator could turn up to a fresh outright go long signal.
In this Point and Figure chart of VMW, below, we can see an upside price target of $172.35 being projected.
Bottom line strategy: the long-term picture of VMW is very positive and I think the broadening pattern on the daily bar chart will resolve on the upside. Aggressive traders could go long VMW here and on strength above $155. Risk below $135 for now. Look for new highs in the weeks ahead.