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Cramer’s charts suggest shares of IBM are ‘ready to roar higher’

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CNBC’s Jim Cramer and legendary technician Larry Williams say shares of IBM, an old-line technology giant that has transitioned its business to the cloud, could be ready to rally even after the company’s disappointing earnings report.

Last Tuesday, IBM missed analysts’ revenue predictions in its third-quarter earnings report, with overall revenue declining 2 percent year over year and some of its faster-growing sections underperforming.

IBM’s stock shed as much as 5 percent in response to the report. Now, shares of the company are near levels not seen since January 2016.

But according to Williams, who has traded futures, commodities and stocks for over 50 years, written 11 books, created numerous technical indicators and runs IReallyTrade.com, IBM’s stock has some key technical trends working in its favor.

He and Cramer, host of “Mad Money,” pointed to IBM’s weekly chart. The action in the stock of IBM is represented by the black line, while the red line combines two of the stock’s dominant past trends: a 325-day cycle and a 145-day cycle.

“Now, these cycles would’ve predicted the recent declines in IBM’s stock,” Cramer said. “More importantly, when you project them forward, they suggest the stock could be ready to roar higher here.”

Williams cross-referenced this chart with one showing IBM’s typical seasonal pattern, represented below by the red line. In an average year, IBM’s stock tends to rally starting in the last week of October, the technician noticed.

And while Cramer often jokes that technical analysis can be a lot like astrology, where there’s no guarantee of reliability, he admitted that some patterns — especially those Williams spots — can be counted on more than others.

“[Williams] found that buying IBM on the 19th trading day of October … has produced 48 winning trades over the last 48 years, as long as you use a $9 stop, and then you hold it for 5 days and sell once you get an up day after that,” the “Mad Money” host said. “As things go, [that’s] pretty darn good.”

Even if this year breaks the streak, “at the very least, Williams has good reason to think that IBM may be poised for at least a short-term bounce here,” Cramer added.

Williams backed up his theory even more by applying the Williams COTSI, an indicator that helps identify whether big institutions are buying a given stock or not, to IBM’s daily chart. It is represented by the blue line below.

“Right now, this chart suggests that the big boys are buying IBM hand over fist,” Cramer said. “Maybe they’re attracted to IBM as a value stock at these levels. It’s got good yield, right? Maybe they believe the Fed will relent and all things tech will be able to bounce. Maybe they think that the tech rally [on Monday] is for real and it’s going to include IBM. No matter what, the one thing we know about institutional buying is that it tends to send stocks higher.”

So, in a market where many investors are feeling “dispirited” by the volatility and aren’t as eager to do some buying, there are still opportunities, even in downtrodden stocks like IBM, Cramer said.

“Here’s the bottom line: this market has gotten pretty ugly. I’m not denying that,” the “Mad Money” host said. “But sometimes, the charts can point you to opportunities in the most unlikely places. Right now, the charts, as interpreted by the legendary Larry Williams, suggest that IBM’s worth buying here.”

Shares of IBM traded slightly higher in Monday’s trading session, settling up 0.71 percent at $130.02 a share.



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Retail earnings reports, China trade impact

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CNBC’s Jim Cramer on Friday said he expects more of the same in the week ahead of stock trading.

“Next week, once again, is all about trade and retail,” the “Mad Money” host said. “This is the week when most retailers report, so we will be listening closely to what they say about the trade war.”

Monday: Trade watch

The stock market will confront the same issues on Monday as the week prior. The days following will see a lot of retailers hold conference calls, and Cramer is looking to see what they have to say about tariffs on Chinese imports.

“The market will punish companies that source in China and reward companies that don’t, because that’s what [President Donald Trump] is doing,” he said.

Tuesday: Home Depot, TJX, Nordstrom

Home Depot: The home improvement retail giant reports earnings before the bell. Cramer is expecting weather to weigh on earnings again.

“There’s much too much rain this gardening season, and I bet that hurt them,” he said. “I still believe Home Depot can tell a decent story about trade, but it won’t matter if gardening season, their equivalent of Christmas, turns out to be a bit of a bust.”

TJX: The T.J. Maxx parent delivers its quarterly results to shareholders in the morning.

Nordstrom: The luxury department chain has an earnings call at the end of trading. The stock is down more than 20% this year and more than 27% in the past 12 months.

“At these levels, it pays you a 4% yield. I think it may be too cheap to ignore,” Cramer said.

Wednesday: Lowe’s, Target

Lowe’s: Lowe’s, the main rival to Home Depot, presents its quarterly earnings before the market opens. CEO Marvin Ellison is guiding the home rehab chain through a turnaround.

“Wall Street loves Ellison, though,” Cramer said. “If Lowe’s gets hit, either before or after the quarter, I’d be a buyer of the stock.”

Target: Target comes out with its latest results before trading begins. The stock is about $20 per share off its September high and has a 3.6% yield.

“I know it’s battling both Walmart and Amazon, which might be too much competition for any one company, ” Cramer said. “But I think CEO Brian Cornell’s doing a terrific job. You know what, I like the stock here.”

Thursday: Best Buy, Splunk

Best Buy: The tech gadget store reports earnings in the morning. The stock is up 30% this year, and Cramer is warning not to take a chance on it at current levels.

“I’m betting they’re going to have to talk about tariffs on the whole darned conference call,” he said.

Splunk: The software analytics company, one of Cramer’s “Cloud King” stocks, presents its financial report after the market closes. Cramer expects Splunk to put up a good conference call out of CEO Doug Merritt. He said Merritt continues to deliver on promises.

“I like it a lot. … [It’s got] no China exposure — I say buy,” he said.

Friday: Foot Locker

Foot Locker: The shoe retailer will lay out its quarterly report for investors before stocks start trading. With a presence in shopping centers across the country, Foot Locker carries Nike, Adidas, Under Armour and a range of other sports apparel brands in its stores.

“The stock’s been held back by trade war worries,” Cramer said. “I bet it will prove to be immune, or at least more immune than most people think.”

WATCH: Cramer breaks down the week ahead in earnings

Disclosure: Cramer’s charitable trust owns shares of Amazon.com and Home Depot.

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

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



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Charts suggest markets could soon get a deep correction

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CNBC’s Jim Cramer said Thursday that his colleague is warning that danger could be on the horizon for the stock market.

The “Mad Money” host took a look at chart analysis as interpreted by technician Carolyn Borogen, Cramer’s coworker at RealMoney.com who also runs FibonnacciQueen.com, to understand what could come of this volatile market.

The major U.S. averages were taken for a ride this week as investors attempted to gauge whether the United States would raise existing tariffs on imports from China on Friday. Because of this uncertainty, the best way to get an empirical reading of the market is through studying chart action, Cramer said.

The high-to-high cycles, as explained by Boroden, in the weekly chart of the S&P 500 is cause for concern, the host said.

Highs on the index have ranged between 31 weeks and 36 weeks, and the most recent peak was recorded last Friday, he said. Prior to that, the last major high was set in September, which preceded the stock sell-off in October.

Markets tend to repeat themselves, and because stocks sold off this week after a big run, Boroden thinks there could be cause for concern.

“In fact, she’s looked at a series of previous high-to-high cycles, and what she’s noticed is that there’s a whole confluence of them coming due this month,” Cramer said. “That’s why she’s throwing up a caution flag, because Boroden thinks we might finally get a deep downside correction — even deeper than what we’ve already experienced during hell week.”

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These 6 stocks could make or break the S&P 500’s run

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Call them the Supersized Six.

Microsoft, Amazon, Apple, Alphabet, Facebook and Berkshire Hathaway — six of the most highly valued companies in the S&P 500 — don’t just boast the index’s biggest market caps.

In fact, those six companies are worth about as much as the bottom 290 companies in the S&P combined. Taken together, their market caps total $4.2 trillion, while the bottom 290 S&P companies are worth roughly $4.3 trillion.

It’s fairly common knowledge that the top 50 S&P stocks are worth more than the bottom 450, and it’s not unusual that the market is frequently this “top-heavy,” says Carter Worth, chief market technician at Cornerstone Macro.

But the concentration in these six names is noteworthy, and it could mean trouble for the market, Worth said Tuesday on CNBC’s “Fast Money.”

Considering the influence they have over the S&P’s direction, it makes you wonder: “Is it an index, or is it a few big names that drive everything?” Worth said. “That’s what makes beating the index so hard.”

He called attention to this chart tracking the six-stock basket against its 150-day moving average, as well as the number of times it has traded above or below that average.

“Literally, every single time we have gotten this far above the 150-day moving average, we have peaked. It is right at that level yet again,” Worth said, pointing to the uptick in the bottom panel’s trend line. “So, as this goes, so goes the market. I think you’ve got a crowding that’s not so good. Just to put it in real context, think of those six names relative to the S&P. It’s all so dependent on these big names.”

Moreover, while the market’s “heavy hitters” have made up 15% of the S&P’s total market cap, on average, since at least the 1990s, that percentage is also ticking up, Worth noted.

“We’re starting to get back to a level that is typically indicative of when markets peak. That’s ’07, so forth and so on,” he said. “None of this is particularly healthy.”

By market cap, Microsoft is worth about $963 billion, Amazon is worth $949 billion, Apple is worth $969 billion, Facebook is worth $540 billion, and Berkshire Hathaway is worth $515 billion.

The broader market mounted a recovery Wednesday, with the S&P lifting off its Tuesday lows early in the session.



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