In his third "Executive Decision" segment of Mad Money Thursday night, Jim Cramer spoke with Patrick Spence, CEO of Sonos (SONO) , the home audio company that just reported a strong quarter.
Spence said that we're entering a golden age of music thanks to streaming, podcasts, in-home video and lots of new technology. The work-from-home movement has also made listening to music at home more important.
Spence said Sonos is now taking its listening experience outside of the home with the Roam, their first portable speaker. The company has also partnered with Volkswagen's (VLKAF) Audi to create the Sonos experience on the road.
So far, the semiconductor shortage has not impacted Sonos and Spence said the company's gross margins are improving.
Let's check and see if the charts are improving as well.
In this daily bar chart of SONO, below, we can see that prices tripled over the past 12 months but prices have been rolling over the past three months with a number of rally failures in the $40-$45 area. Prices have broken below the March lows and are trading below the now declining 50-day moving average line. The slope of the 200-day moving average line is still positive and intersects just above $25.
The On-Balance-Volume (OBV) line moved higher into the middle of April but shows some weakness since then which suggests that traders have turned from aggressive buyers to aggressive sellers. The Moving Average Convergence Divergence (MACD) oscillator has fallen below the zero line this month for an outright sell signal.
In this weekly Japanese candlestick chart of SONO, below, we see a mixed to bearish picture. Prices made a decent base in the $15-$10 area before the rally to around $45. Prices are still in an uptrend above the rising 40-week moving average line but prices have topped out for now. The latest weekly candle shows a good sized lower shadow telling us that traders are rejecting the lows.
The OBV line shows weakness in April as traders became aggressive sellers. The MACD oscillator has crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of SONO, below, we can see that prices have reached a downside price target in the $33 area.
In this weekly Point and Figure chart of SONO, below, we can see that the software is projecting the $20 area as a potential downside price target.
Bottom line strategy: There are enough sell signals on the charts of SONO to warn buyers. Prices may not decline to the weekly Point and Figure target of $20 but a test of the 200-day moving average line around $26 is possible. Defer purchases for now.