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Charts show investors ‘can afford to be cautiously optimistic’

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Investors can afford to be “cautiously optimistic” at this point in the stock market’s cycle, CNBC’s Jim Cramer said Tuesday after consulting with chartist Rob Moreno.

Moreno, the technician behind RightViewTrading.com and Cramer’s colleague at RealMoney.com, sees a convoluted path ahead for stocks. After calling the December bottom, Moreno noticed that the Nasdaq Composite’s late-2018 decline was about a 24 percent drop from peak to trough.

That’s important because, in a bull market, stocks tend to see “periods of consolidation — pauses in a long-term bull run,” Cramer explained. “To [Moreno], the decline here looks very similar to what we saw from the Nasdaq in 2011, 2015 [and] 2016,” three consolidation periods of recent past.

If he’s right, that could be bad news for the bulls, who may have to wait at least seven months for stocks to break out of their consolidation pattern, during which they tend to trade in a tight range, Cramer warned. But Moreno still sees some opportunity for investors.

“If you believe his thesis about the market — that we’re in a consolidation period, one that will last until September — then you can afford to be … cautiously optimistic right now,” Cramer said on “Mad Money.”

Part of Moreno’s confidence came from his analysis of the S&P 500’s daily chart, which also included the support and resistance levels from its weekly and monthly charts.

Even after a 16 percent rally from its December lows, Moreno saw more room to run for the S&P based on its Relative Strength Index, or RSI, a technical tool that measures price momentum. The RSI, he explained, hasn’t yet signaled that the S&P is overbought, and the Chaikin Money Flow, which tracks buying and selling pressure, shows big money pouring in.

“Moreno thinks that these new buyers are the kind of investors who won’t be panicked out of their positions by short-term volatility,” Cramer said, adding that the technician sees about 3.5 percent more upside for the S&P before it hits its ceiling of resistance at 2,818.

But if the S&P manages to trade above its ceiling of resistance and return to its October highs, Moreno expects a “synchronized reversal” in the stock market that could crush the major averages, the “Mad Money” host warned.

“At least until September, Moreno says you should be a seller if the averages approach their October highs — that’s around 2,930 for the S&P 500,” Cramer said. “Eventually he expects a breakout from these levels, but it won’t happen any time soon.”

So, what’s the right move for investors? According to Moreno, not all is lost. He still expects to see strong gains — a roughly 7.5 percent move — before the current rally peters out. But he doesn’t want buyers to get too trigger-happy, especially considering the months of sideways trading he’s predicting for 2019.

“Until [September], he expects the market to trade in a fairly wide range, with the S&P bouncing between 2,350 and 2,930. For now, we’re headed higher, but he says you should use these key levels as entry and exit points until the consolidation pattern finally comes to an end later this year and the averages resume their long march higher,” Cramer said. “Even if he’s right and this rally will lose its steam after another 7.5 percent gain, that’s still pretty good, but I am very wary and it makes me want to do some selling after this run.”



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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?
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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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