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Charts reveal ‘serious’ hurdles facing chipmakers’ stocks

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One of the market’s top semiconductor-based exchange-traded funds is signaling some obstacles ahead for the chipmakers’ stocks, CNBC’s Jim Cramer said Tuesday after consulting with one of his favorite chartists.

The chartist, Carolyn Boroden — the brain behind FibonacciQueen.com and one of Cramer’s RealMoney.com colleagues — has a unique methodology. She uses Fibonacci ratios, a number series discovered by medieval mathematician Leonardo Fibonacci that repeats throughout nature, to spot patterns in the stock market.

Specifically, she measures past swings in a stock or an index, then runs them through a Fibonacci prism. When she does this with a chart’s Y-axis, price, it shows her potential levels of support or resistance. When she uses the X-axis, time, it flags particular times when a stock is most likely to change course.

So, with investors fretting about weakness at longtime industry stalwart Nvidia, Cramer and Boroden found it worth circling back to the chipmaking group via the VanEck Vectors Semiconductor ETF, also known as the SMH.

And, based on Boroden’s analysis, “the SMH needs to run a series of gauntlets if it’s going to keep climbing here,” Cramer said on “Mad Money.” “First, the semis need to get through this week without experiencing a serious reversal. […] Then, the SMH needs to rally $3 to $7 bucks to clear its two ceilings of resistance. If it can do that, then Boroden believes the semis will be able to keep climbing. [But] that’s a mighty big if.”

Here’s how they reached that conclusion:

First, Cramer called attention to one of Boroden’s recent successful predictions: when the SMH bottomed in late December around $80, it touched a floor of support “created by a cluster of Fibonacci price relationships” between $79 and $81, as well as a confluence of timing cycles that suggested the index was due for a bounce, he explained.

Now, Boroden sees potential for more upside. Her methodology suggested that the roughly $94 fund could vault to $123 and change or even $135, which would constitute a 31 to 44 percent move. But for that to happen, there are “major hurdles” the SMH needs to top before the semiconductor stocks can continue their rally, Cramer said.

The first two hurdles have to do with symmetry, the idea that stocks or indices tend to rally the same dollar amount during sustained moves. Boroden noted that the when the SMH last saw a sustained rally in May, it climbed $16.53. Now, it has already bounced more than $16 from its December lows, which could mean that the rally might soon peter out at the SMH’s $97 ceiling of resistance.

But even if it trades above $97, the index has another ceiling of resistance at $101. Boroden said the SMH could hit that level if it retraces its rally from February of $20.67. But even with that, it won’t be smooth sailing yet, she told Cramer.

“Perhaps the biggest hurdle has to do with the Fibonacci timing cycles,” Cramer said. “In December, when we were getting crushed, a cluster of timing cycles was good news. But now that the SMH has been rallying, a bunch of these Fibonacci timing cycles could mean that this semiconductor index is about to pull back. And Boroden points out that we do have a bunch of these timing cycles com[ing] due … between today and Friday.”

All in all, Boroden sees the SMH approaching “some serious resistance this week” as the tidal wave of earnings reports continues to sweep across Wall Street, Cramer said.

“If the semis can make it to the end of this week without rolling over, she says that would be a good sign and the upside could be significant, but there’s also a decent chance the group will get slammed and retest its December low,” the “Mad Money” host concluded. “At least you know what the technical levels are to look for.”



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The charts show Amazon’s stock can break through record highs: Cramer

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Shares of Amazon plunged for a third-straight trading day on Monday, and it may have opened up the kind discount that investors are looking for, according to the charts.

CNBC’s Jim Cramer, citing analysis from chart analyst Caroly Boroden, said the stock is on a positive trend that could carry it back above the $2,000 level in due time. Since reporting a second-quarter profit miss last week, the equity has shed nearly 4.5%, but it has a chance to catapult past its record high, says Boroden, who heads FibonnacciQueen.com

“Boroden says that the larger pattern here is still bullish, pointing to much higher prices down the road,” the “Mad Money” host said. “After the stock’s recent pullback, she thinks you’re getting a rare buying opportunity in Amazon.”

Boroden, a Cramer colleague at RealMoney.com, predicts the stock could be gearing up to rally to about $2,073, a more than 8% upside from Monday’s close. In order for that to happen, the stock must hold above a group of support levels in the $1,880 and $1,890 ranges, Cramer explained.

On Monday, shares of Amazon started trading at $1,930, bottomed near $1,890 and recovered some to end the session above $1,912. If the stock falls below the aforementioned levels of support, Boroden says it has additional support to lean on at about $1,860, Cramer said.

Boroden’s long-term price target for Amazon, based on past rallies, is $2,145. In the best case scenario, she thinks the stock could climb as high as $2,509, Cramer said. For that to happen, she says, the stock’s five-day exponential moving average has to rise above the 13-day exponential moving average on the same daily chart, the host added.

“That crossover is the Fibonacci Queen’s buy trigger because it tells you when a stock has gotten its groove back,” Cramer said. “Of course, if Amazon breaks down below Boroden’s last floor of support at $1,810, that means she’s wrong and she says you got to throw in the towel. I think she’s going to be right.”

WATCH: Cramer goes off the charts on Amazon, Alphabet and the Nasdaq 100

Disclosure: Cramer’s charitable trust owns shares of Alphabet and Amazon.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

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If the Fed cuts rates, this is a must-own stock

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CNBC’s Jim Cramer said Friday that the steel cycle is making a turn and Nucor will be the best way to play the market.

In recent weeks, the big steelmaker twice increased the price of flat-rolled steel that summed up to $80 per ton, and that’s how the turn in the group tends to start, the “Mad Money” host said.

“That’s the up-cycle. I’ve been waiting for it and it should allow gigantic steel producers like Nucor, the largest in America, to make an enormous amount of money when it goes right, surprising both the analysts and the market,” he said.

Service centers, he explained, found they had a glut of steel supply when the economy began to slow in late 2018. Companies responded to President Donald Trump’s move to slap tariffs on Chinese imports, and stem the flow of cheap steel into the country from China, by building up inventory. Too much supply later in the year caused steel prices to fall, Cramer said.

However, the inventory has been worked off over the past six months, and it’s evident in Nucor’s price hikes on basic steel, he continued. Nucor is also building more plants to prepare for higher grade steels, he added.

An interest rate cut from the Federal Reserve, which many Wall Street investors are anticipating, will be a big boost in the economy, the host said.

“That’s why Nucor’s a buy here, and if we get a couple of rate cuts, it will be a must-own stock,” Cramer said. “Nucor’s got better risk-reward, making it the best way to play the new, Fed-induced, presidential-endorsed steel cycle that I think is beginning right now.”

Get his full thoughts here

Cramer’s game plan

Wall Street is preparing for a big week of earnings that will offer a better read of the apparent economic slowdown, Cramer said.

During Friday’s session, the Dow Jones Industrial Average slid nearly 69 points. The S&P 500 and Nasdaq Composite also slipped 0.62% and 0.74%, respectively, as the market digested a full week of the latest quarterly results. The two latter indexes posted their worst weeks since May.

“You need to understand that we’re about to embark on the busiest week of the year for industrial earnings,” the “Mad Money” host said. “We’ll be flooded with new information, and if you can’t handle it or handle all the noise … this might be the perfect week to take your summer vacation.”

See what Cramer’s expects in earnings next week here

Special delivery

The GrubHub website on an iPhone.

Andrew Harrer | Bloomberg | Getty Images

GrubHub is too tough to own, even if the online food delivery company delivers a surprisingly good quarterly report in the coming weeks, Cramer said.

Amazon, the notorious industry disruptor, in June shut down its 4-year-old Amazon Restaurants project that delivered plates to Prime members in 20 U.S. cities.

“The bottom line is that Amazon‘s getting out of the food delivery space — that doesn’t change anything, ” the host said. “GrubHub’s still facing relentless competition. I think it’s way too risky to own here.”

Read more here

Cramer’s lightning round: The autos aren’t so hot, but Ally is fine

In Cramer’s lightning round, the “Mad Money” host zips through his thoughts about callers’ stock picks.

Workiva: “There are now so many cloud-based mobile companies that I have to take a breather and do work on this.”

Tegna: “I don’t really want to get bigger in the entertainment business, TV business, at this very moment.”

Ally Financial: “This is a financial that’s doing quite well. It’s funny because the automotive market isn’t that hot, but they’re well-run, it’s doing well. I mean look, I’m more of a JP Morgan, Bank of America guy, but I’m not going to disagree. This one’s doing quite well. “

Disclosure: Cramer’s charitable trust owns shares of Amazon and JP Morgan Chase.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

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IBM earnings prove company paid the right price for Red Hat

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CNBC’s Jim Cramer on Thursday broke down why IBM’s $34 billion price tag to buy Red Hat was worth the cost.

Paying $190 a share for the open-source software, the October deal came at a 63% premium in part. Cramer argued that premium is understandable because IBM was not the only bidder. In late 2018, Red Hat revealed that there were three other bidders without naming names. CNBC previously reported an offer from Alphabet‘s Google was entertained, and Stifel analyst Brad Reback also said that Google, Amazon and Microsoft engaged in discussions.

“It was a competitive situation, people, so IBM paid what they had to pay to get the job done,” the “Mad Money” host said. “But, honestly, that 63% number it’s a little misleading, frankly.”

The premium isn’t quite as hefty when compared to Red Hat’s average share price last year, Cramer said. At the time the agreement was announced, Red Hat traded at $116 per share. The stock, on averaged, sold for under $142 a share in 2018, which instead comes in at a 34% premium, he said. The deal closed earlier this month.

Since the deal was announced in October, the rest of Cramer’s “cloud king” basket of hot cloud-based tech stocks, which once included Red Hat, have increased market cap as a group by 54%. They also trade, on average, for 54-times next year’s earnings, the host said. IBM, however, paid 46-times for Red Hat, he noted.

“If anything, I’ve got to tell you, based on these comparisons, you could argue that they underpaid for this company,” Cramer said. “In other words, I don’t think they overpaid versus what this business was really worth.”

Big Blue, which made a name for itself selling computer hardware, pivoted into the cloud-based software business as a way to boost revenue growth, he said. Artificial intelligence and analytics is also a part of the focus. The company wants to offer a platform to manage hybrid cloud IT infrastructure, and Red Hat is a solution, he said. Red Hat, which will keep its identity and leadership as a subsidiary, lets IBM combine on-site private servers with third-party cloud computing.

IBM has been working to catch up to Amazon and Microsoft in cloud infrastructure. At the time of the acquisition, CEO Ginni Rometty called it a “fair price” to become the “number one hybrid cloud provider.”

Red Hat is critical, Cramer said, seeing that IBM reported a second quarter earnings beat but cloud sales were up 9%, down from 16% the quarter prior and 18% in 2018. Revenue came in line with Wall Street’s expectations, although it fell 4% year-over-year.

Red Hat was not included in the numbers.

“I think these results more than vindicate IBM’s decision to pay $34 billion” for the company, he said. “They needed a change of direction and that’s what Red Hat gives them. It’s why I still think the stock is still worth owning here even up here after this nice day.”

WATCH: Cramer breaks down Red Hat’s price tag

Disclosure: Cramer’s charitable trust owns shares of Alphabet, Amazon and Alphabet.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer’s world? Hit him up!
Jim Cramer TwitterFacebookInstagram

Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com



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