At the top of Thursday's Mad Money program, Jim Cramer discussed what was sending the Covid-19 stocks higher. Cramer said e-commerce stocks like Etsy (ETSY) continued to make gains.
We last reviewed ETSY on May 8 and wrote that, "The price of ETSY looks extended on the upside so new longs should wait for a dip toward $70 to do their buying. Risk to $60 for now. The price targets are $100 and $111." Now that prices have passed our $100 price target a fresh look at the charts is a good idea.
In the daily bar chart of ETSY, below, we can see that prices have been trading in the $100 area for a few days. Prices are above the rising 50-day moving average line and above the rising 200-day line. I would consider prices extended on the upside when compared to the slower-to-react 200-day moving average line.
The daily On-Balance-Volume (OBV) line has made a new high for the move up but the actual level of trading volume has not been particularly strong. The 12-day price momentum study shows a lower high from April to June, telling us that the pace of the advance has slowed despite prices making new highs. This is a bearish divergence and can be a "heads up" that prices can be vulnerable to a decline.
In the weekly bar chart of ETSY, below, we can see a bullish picture with prices in an uptrend with a strong OBV line and MACD oscillator. The one issue I have with this chart is that prices look extended above the rising 40-week moving average line.
In this updated daily Point and Figure chart of ETSY, below, we can see a new price target of $118.
Bottom-line strategy: With prices looking extended on the upside and a bearish divergence from the momentum indicator, traders who are long ETSY should both take more than of their profits (i.e. sell) at current levels and look to sell the balance of their longs in the $110-$118 area if available.
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