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tv   Mad Money  CNBC  December 28, 2016 6:00pm-7:01pm EST

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>> final trade. >> still doing final trade? >> we don't have a lot of trade. >> all right. goodbye, desk. see you back tomorrow at 5:00 for a ♪ my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to make you some money. my job is not just to entertain you but to educate you. so call me at 1-800-743-cnbc or tweet me @jimcramer. close watchers of "mad money" know i'm not a chartist, but i do play one on tv weekly. showing you technology patterns that predict the next big move for stocks.
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give that i base all my work on fundamental factors related to the company i study and not the shape of their charts, the off the charts segment is heretical to my traditional stock picking methods. but i know from you're feedback that you're interested this analysis and it's proven itself time and time again to really get a lot of people involved at the right level, say. now, not for a minute as i explain in get rich carefully, where i devote a whole chapter to charting, have i become a chartist myself. i still single out stocks to highlight and teach about offer stoiing the fundamentals, the abials, the sectors and i overlay them on my broader world view at the moment chartests could care less about this stuff. i wonder if they could do their jobs with the companies' names blacked out. in fact, i am sure they could. some of them hate the distraction of knowing much at all about a company for fear it would bias against them against the stocks chart. can you imagine? now, i've become pretty
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proficient at charting but i still rely on the work of professional technicians to learn techniques that i can in turn teach you. that's why tonight i am picking the best of the best charts of some of the best technicians we have worked with, exploring the patterns that have become reliable to the point i'm pretty astonished at how accurate they can be. i guess you got to call me a long term believer. you know what, that's why i've started nearly every saturday morning for the last 30 years reading the standard & poor's trend line daily action stock charts formerly on paper, now on electronic distribution. they contain hundreds of charts, and i match those charts with the patterns i have learned over time. i think the research available for the most winning of the charts and they often become segments on the show you see later in the week. why do the charts work? people always want to know. first you must consider them as if they are footprints at the scene of a crime. these footprints trace out what big money managers might be doing with their buying and selling. these portfolio chieftains at
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large funds often know more than others including you and me. the charts of where their money goes, the charts of the stocks, put together clues that these big boys leave. second reason to care, there's a remarkable self-fulfilling nature of charting stocks. so many professionals look at these drawings and take them to heart that they will simply avoid stocks with predictably terrible charts and find stocks to own, stocks with positive moves in the past. when i worked with karen cramer, she would look at the charts each morning seeking ones that stood out as professional breakouts and breakdowns, and then have me research the ones with most predictable patterns to get a handle on what might really be going on. we got some of our bift ideas from some of those brainstorming sessions, a true and successful melding of the technicals and fundamentals could produce excellent short and long-term results. all of charting and technical analysis starts not just with the pictures of individual
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stocks but also what are known as the internals. internals. patterns about stocks in the aggregate that give you clues of the direction of the entire stock market. for years ever since the great recession that showed the inherent weakness in our financial system, there has been tremendous skepticism about any advance of stocks. while i believe the systemic risks have been reduced, i know each rally creates really a worrisome set of risks. i know many of you fear you're coming in at a level that could turn out to be, let's say, too late, too high. and you will lose money either way. >> sell, sell, sell. >> technical analysis including analyzing indicators to help you determine the overall direction of the market, more important than ever given that so many stocks are influenced mightily by the tug of the s&p 500 stock futures. sometimes the technicians, everything hinges on putting the charts of individual companies and the charts of the bigger averages to create comparisons that ill lus date and ill lum
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2345i9 conclusions about true market strength. they're looking at what is known as confirmation of a move to detect its legitimate massey. i think they're important to the safety of a move. the most important and obvious confirmation. let's say the dow jones average hits a new high. historically that high will not be sustainable unless the dow jones transportation index also hits a high or confirms the breakout status of the dow itself. the dow jones transportation index is a measure of commerce, tracking trains, planes, truck, freight forwarding. srnlt that a good gauge? if both the industrials and the transports hit new highs, i often tell you that the move is legitimate, and it can be trusted. it is real. this is some of the oldest technical work dating back to charles dow, the funder and first editor of the "wall street journal" who created the dow theory to validate rallies or defrock them. you often hear at the top of the show that i like how the transports acting. that's because i'm trying to see if the move has staying power in
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order to bless it. i look at a host of other indicators, the banking index is important. the housing index. i look at the semiconductor index. and the rth. that's that all important etf that encompasses the big retailers. i like to see all these indices move up in sync before i truly bless a market move for you. you get all these indices rolling higher, you have to put the maximum amount of chips on the table. oh, boy, but is the inverse true. if we get a move, a move up without confirmation from the ma jart of these indices, the whole rally could be a fakeout and can't be trusted. the classic example, if you go back to the move up to record highs before the great recession, you won't notice something pretty incredible if you go back and study it. you will notice that there was almost no participation among the financials, the retailers, or the techs. technical analysis got you out of that market before it was too late if you followed those indicators. what are the other internals i
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look at? i analyze the advances and declines to figure out whether the rally is too concentrated. i like amarket with good breadth or a lot of participation by many different groups. i also look at the new high and new low ratio. it isn't easy to get on that new high list. the company has to be doing exceptionally well and the sector has to be strong. that high list is rarefied territory. you run the gauntlet, you have a good stock, a stock that i probably want to buy on any pullback that's market related. and if there are a lot of stocks on the new high list from many different industries, that's actually a terrific sign. so here's the bottom line. you may not be a technician, but you need to know what the charts are saying, and you need to know how to read the internals to verify a real move or a phony one. stay tuned, and we'll go over a whole host of predictive patterns that suffuse pretty much everything we do around here not just on the off the
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charts tuesday, but in stock selection every single day. jim in michigan, jim. >> caller: jim, hi. how are you? thanks for taking my call. >> of course. thrilled that you called. what's up? >> caller: i got a question for you. in the segment, you were talking about secular stocks. could you define for me once again what a secular stock is and maybe give me an example or two? >> certainly. this is a very important issue because it's a term that gets thrown around. secular means a secular growth stock is something that does nod need the gross domestic product of the world to increase in order for it to be able to beat the numbers. some of the classic secular grower stocks would be some of the biotechs, some of the retailers that have terrific growth. gary in california, gary. >> caller: mr. cramer, booyah to ya. >> booyah, gary. >> caller: gary from california. my question is regarding dividends in a down market, sir.
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if you're accumulating dividends on a number of stock as you suggest, is it better to reinvest them in a down market or to take the money as cash and then possibly reinvest that in other opportunities? >> well, you see w he don't know when a down phase is going to end, and we know the power of compounding is an amazing thing. so we're going to stick always on this show -- i know it sounds pretty pedestrian, but we're always going to opt in favor of reinvestment because fortunes have been made through the power of compounding. i've got to go with that regardless of the near-term consequences because i'm thinking long-term for you. fundamentals, oh, they're key. but technicals matter too. tonight i'm bringing you into the world of mastermind chartists so you can learn to see the whole picture behind a stock's moves. on "mad money" tonight, we know the charts important, but what technical tool can help you detect floors and ceilings? i'm revealing it. then how can you tell if a company is overbrought and ripe for a pullback or oversold and
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ripe for a bounce. mixing patterns isn't only for fashion. i'm highlighting the patterns worth banking on when it comes to investing. so why don't you stick with cramer. >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.
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wh's the value of capital? wh? a basketball costs $. wh's team spirit worth? (cheers) what it worth to talk tyour mom? what's the vue walk in thwos? e e e of capital iscreate,
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tonight we are offering the best of the best of technical analysis, a one stop shop of everything you need to know to augment your investing with help of some of the best chartists in the land. let's work on something that's been at the province of the best chart work on the show, spotting bottoms for best entry points and examining ceilings for the best places to exit or sell. when you pick individual stocks, you are betting from the moment you buy them that they're going to go higher. i know, it's a pretty simple concept but how often do you do solid fundamental work on a company and try to figure out whether it's the right decision to pull the trigger because your homework is finished? and then, well, it just turned out to be a terrible time, and you're buying oblivious to the stock. my homework is done, let's go buy. maybe it's not the right moment. after all the work i've done on the off the chart segments, i know say you're being short sighted if you don't check out how the stock looks technically after you've done that homework
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but before you put the buy order. in fact, i would consider looking at the chart of the stock you like as part of the homework. get that in your head. get it ingrain the into your thinking. sometimes finding bottoms after long declines can be incredibly lucrative. a good example. let's go back to the bottom of 2009. now, i had a sense that declines velocity was lessening. i had already heard mark hanes make his famous hanes bottom call based on his innate feeling. i know my friend doug that writes with me had actually turned pronouncedly positive. he was saying we were in a generational bottom. but i was still skittish about picking any individual stock to recommend to you. so i was looking for a situation that seemed about as bulletproof as i could find. i came up with at&t, the phone company. it had so much going for it. you got to go back in the way back machine, but including a smashing rollout of the apple
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iphone, which was going to produce record profits. had an outsized dividend when the yield at 6.2% at that moment. the yield was much higher than just about any stock in the dow. the dividend was safely backed by their hugh monday gusz cash flow. still, though, the stock kept plunge jing. no, no. check the chart. i waited for a few days while the stock seemed to stabilize and decided at last the level might be right. in dicey moments like these, it's best to check with the chartists. so i d. i actually brought in four chartists. amazingly they realized it had found a strong foundation and was definitely worth considering for an investment. remember, they didn't care at all about the fundamentals. so take a look at what attracted them. first all four technicians agreed that at&t had established what is known as a climax low at 21 back in the tsunami of selling that was this period, okay. you just have to understand that we are just at one of these moments that was just so
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hideous. you can see the big lift in stock and then -- well, i don't want to give away the story. that's where lots of sellers had capitulated right here. but buyers had started to step up to create a base, okay? see the extended base? they arrived at that judgment by looking at where the volume and the sum of all the transactions during that period had expanded to a level far in excess of a normal period's trading. so you can see there's a normal period's trading, and then boom. that's a sign that the sellers had exhausted themselves. the volume levels according to tech initiate ins showed most of the big portfolio managers who wanted out the stock, they had fled it by now. at the same time, buyers had step the up to meet the supply with the concomitant level of demand. think of it like this. until you got the climax, there were so many more sellers than buyers at aefl level that they knocked the stock down with their own selling. as long as sellers overrun buyers with their dumping, no base can form. bad time to buy. a climax is a sign that those potential sellers who have been holding on for some time are
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finally giving up en masse. big give-up. remember technicians don't care why that might be the case. when they see that volume get larger or expands but the stock doesn't go down, that means at last the stock has found its floor, so it's now time to buy. it's safe. that's where the buyers are at last equal to the sellers in their power to determine the direction of the stock, and that's a form of equilibrium. it's finally upon us. ok okay. that's going to happen when a stock takes out resistance overhead, okay? to examine the possibilities of a stock the technicians don't just look at the closing prize and the graph that price against the previous days week or close, they don't look and say that looks good, that looks bad, no. that's not helpful because it doesn't yield a true picture. instead they use what is known as a moving average to better represent the action . closing prices of a stock over a period of time and then adding
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those prices up and then dividing those prices by the days and particular measured period. fre you can measure a moving average over a ten day period by adding up ten days worth of closing prices and dividing the sum by ten, plotting the number on a graph. each subsequent day you add in the new closing and drop off the earlier price to get the sum of a new ten-day measuring period. the four technicians i check the in with for at&t, they chose to use a longer term view. they selected 200 days. they noticed even though at&t had found a floor at the $21 level, that the stock had repeatedly bounced off of, it kept failing, meaning it couldn't get through, failing to move up above the 200-day moving average. they had plotted it. that's what they looked at. that created what looked to be a ceiling. see, we had the ceiling, the 200-day moving average. there's nothing you can do. they felt every time it got there, the stock was capped. then at last at&t cracked
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through the ceiling of resistance, and that's the 200-day moving average that was the signal. that was the signal that at last at&t could generate a great trade or an investment. the old roof became a new floor. here's your new floor. every time the moving average went above the old roof, it would create the possibility of a new floor. then the stock would come back and test that floor and it held. this pattern emboldens buyers. it didn't go back to where that climax low was. it held. looking back at the beautiful bottoming that we see here with at&t, it now seems like child's play, doesn't it? yeah, of course it was done going down. yet at that moment it was anything but easy because at the same sometime these technical analysts were saying the bottom was in and saying it was time to buy, the fundamental analysts were scared out of their wits. they were all scared to death right here. some were even worrying about pension obligations that could cause the dividend could be slashed, something that was way, way wrong but it scared the heck
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out of me. remember how many people are in this stock for the dividend. that base gave the stock a launching pad to blast off into almost a straight line into the 30s. here's the bottom line. when you see this kind of reliable pattern as at that time demonstrated, despite what the fundamental analysts might be saying, you have to use the discipline that these technicians give you to pull the trigger and take advantage of a fabulous buying opportunity that might otherwise be overlooked after the market takes a real shellacking. after the break, i'll try to make you more money. your insurance company
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when ywih tot&t and have directv. welcome back to our special tech nickel show. the next crucial theme for technicians, whether a stock is overbrought and ripe for a pullback or oversold and maybe ready for a bounce. you determine whether a stock is
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overbought or oversold by charting the ratio of higher closes, also known as the relative strength index. the rsi is a momentum oscillator that measures the direction a stock is going and the velocity of the move. we like to match the relevant strength of an individual stock to something else. perhaps the relevant strength of its sector or maybe that of a larger index and we measure the price action historically. we're always looking for anomalies where strength stands out because that's the sign of a pending move. perhaps a momentum switch that we wouldn't know if we just read the research on the stock. for relative strength chart work i often turn to bob language and tim collins. many technicians vary the length of time over which they measure relevant strength. both lang and collins are looking for any pattern that reverses the action of the previous period because that's the sign that a breakout or a breakdown of some magnitude might be upon us. they love strong relative strength situations, but they
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also like to time their buys after pullbacks. get that better entry point. they really care about bases. typically when a stock gets overbought, it is ripe for a pullback because overbought stocks, ones with many buyers reaching to take in supply, tend to snap back after they've gotten too far away from their longer term trend line. the inverse can be true too. a stock can fall so far, so fast that you should expect a snap back because it's technically oversold. you hear me use these terms. we see these patterns constantly. they're reliable indicators that a change is direction is about to occur. these are terrific action points, people. if you were debating buying a stock after you've done all the research and find the stock is overbought, i usually tell you to wait for a pullback. that's almost always comes because enough chart work has been done to know the vast majority of stocks overshoot direction. retracing isn't necessarily negative. charting, though, is tricky. periodically some stocks are so strong they break through all
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the ceilings of all traditional significant measurement periods and they stay overbought perhaps for weeks at a time, defying the historical trading patterns that have hither to trapped them within the bands of extremes. they defy the notion of the inevitable gravitation of the old equilibrium line. when you spot these highly unusual moves, you know what? you may have to strap yourself in to get a real mioon shine. this is rear but when it happens, it's big money. we saw it occur in july of 2009 as dan fitzpatrick pointed out to be using a stes tactics oscillator, this time in las vegas sands. las vegas sands, one of the large casino businesses had been repeatedly stalled at the 10 buck level, falling every time it hit. boom, boom, boom. you know, just not working,
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okay? but when the bulls finally broke out of the corral, there was no stopping them, and the stock gained relative strength after it pushed through instead of regrouping to recover from its overbought status. that's a very rare pattern. you see this thing? it just stayed overbought, which told you good things were going to be ahead. it never retreated as you would have expected. buyers wouldn't quit despite the stock being overbought, and that is a sign the strongest kind, a positive move in the book might be taking place. at any given time i'm expecting a pullback, but, no, you had that gigantic long term overbought. this stock proceeded to go from $10 to $48, pretty much in a straight line with no substantive pullback to speak of. an overbought condition that can stay overbought is an golden opportunity. i like to mary the fundamentals with the charts so i'm not to depend on the pictorials. what was happening underneath this chart that it was able to say overbought for so long?
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that's when the chief locus of profits for vegas sands went from being vegas to macau. the change transformed lvs from a sew so so company into an northwesterly powerhouse. the charge told you about the transformation well ahead of the wall street analysts. they weren't thinking about macau here. the chartists were thinking there's buyers lurking. volume is another key tool to chartists. they use that to spot pivots. we also say volume is a lie detector, telling us whether a move is for real or not. when there is a small move on light volume, the technicians ignore it. but when there is a small move on heavy volume, the chartists drill down laser like to see if it's a precursor to something bigger and infin atly more tradeable. chartists are at all times looking for accumulation on big bottom or distribution. that's a synonym for selling of a stock, and that could
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telegraph a big decline. they measure these moves by something called an accumulation distribution line. when the calculation of the acouple liegs distribution line is arcane, involving the -- i know it is -- charting of whether a stock closes higher on greater volume on any given day versus lower on low volume, i care passionately about it because it can go against the grain of conventional thinking about a stock, and that's why i love charts so much. they go against the fundamentals sometimes, and stiemsz they're right. we saw them being right in monsanto in july of 2012. this was an unbelievable one that i completely got wrong. thank heavens for the chart. i didn't care for this stock at the time. i didn't like gmos. i was kind of biased. tim collins saw it another way. he said the accumulation distribution line showed that while the stock had down days, they were on light vibes. all the down days you had low lines, and heavy volume on the up days. that's a sign more money was
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flowing into the stock than out of it. collins noted a persistent accumulation or buying pattern versus the distribution or selling pattern convinced him that large funds were building positions to own this stock long-term. not to rent it for a quick move. it turns out that what i didn't see, what i was so confused about was that monsanto stock had started to be correlated with the price of corn, which was going higher back then because of newfound demand for ethan ethanol. i was far too concerned about near term earnings and worries about a shortfall and wasn't thinking big picture. but the charts showed you big picture. the work of collins told you not to fear. it was showing you that something bigger was developing than just the quarter. he was dead right and a stock i would have kept you out of turned out to be a big winner when corn shot up, taking monday santos stock and its ierngz up with it. the big boys knew the relationship with corn and monsanto business. you were able to piggyback by
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using collins' work. i got smoked. he saw it. bottom line, we need to look at lots of different indicators to spot big moves indicators like overbought, oversold levels, despite important turns that might not be visible otherwise. powerful moves can and oven do elude those who are only focuses on the underlying companies and not the action of the stocks themselves. let's go to dan in illinois, please. dan. >> caller: cramer, booyah. thank you for demystifying the market and helping us make it accessible. >> that's what i want. i want everybody to understand their money. that's my goal. how can i help? >> caller: thank you. i'm wondering if i start with a small position in a stock, a company i like, and the stock just keeps going up, the most it comes down is maybe 2%, 2.5%,
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how can i get a more sizeable stake? >> my discipline will cut off the down side, which is far more important than cutting off the yup side. and if you bought a position in a stock and it kept going higher and you didn't get any more, well, it's a trade, and you got to take it. i know people don't want to hear that, but when you violate your basis and pay up, ki show you for years and years and years for my charitable trust, i have done the work. it is almost always a mistake. chartists use all different types of indicators to spot big moves. that helps them stay ahead of the game and the fundamentals. much more "mad money." head and shoulders isn't only used for preventing dandruff. i'm telling you how it can help you make some money. then are technicians and fundamentals like the jets and the sharks? you're not going to miss my take on the dynamic between the two. and got a burning question? i'm taking your tweets. go ahead and tweet me @jimcramer, #mad tweets. i might answer your question on air. stay with cramer!
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we've learned a lot tonight about the key terms of technical analysis. now let's look at some of the individual charts that many of you find fascinating even as some of the patterns, they almost sound silly as if they're mimicking letters or geometric shapes or even body parts. i learned not to ignore one of the most simple but far the most reliable patterns out there. the dreaded head & shoulders pattern. >> the house of pain. >> my charitable trust bought al co-awa in the low teens in 2010 ultimately took a gigantic bath because of that ill informed or could i just really say maybe early buy? remember, i like to do mea culpa's on the show. you can learn from my mistakes.
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something that solidified when it announced it would split into two separate companies. why don't you take a look at alcoa. it's enjoyed a healthy run from the winter of 2010 right up until february of 2011, rising from $13 -- nice rise, right? -- up to 17 as its earnings trajectory seemed to have finally turned around. not long after the hot hit 17, it took a quick dive back to 15. no reason i couldy certain. then it went right back to 17. then it went up to 18 on the eve of the quarterly report. i thought the quarter, when it was announced, was a fine one, beating both the top and bottom lines. most of the time that's all you can ask for. what worried me, though, was after an initial positive reaction, the stock then dropped down to 16 and change on the news of that better than expected quarter. a few days, it was back to 17, and i felt almost vindicated, right? i mean, come on, now can go back
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and challenge that 18 level. so i went and bought more. i went and bought more right there. could i have been more wrong? i don't think so because that 17 to $15 dive represented on the chart as a point a and b, then followed the run to c, 18, back to 16, d. finally 17, e. you know what that is? that's a perfect head & shoulders pattern. yeah, just like a human's head. that is it. that is the most frightening pattern in the entire chart book, and alcoa traced it out just when i thought we were out of the woods. what was happening during that period that the head & shoulders pattern flagged? europe and china began their slow downs and aluminum came into glut. kleinfelder could control his own company but not the price of the commodity itself. it still is aluminum. over the course of the next few years, climb felder was able to reinvest alcoa to be much less
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didn't on the commodity. it cost the trust quite a pretty penny. mea culpa. one of the things i admire about technicians is their intellectual consistency. at the beginning of january 2013, lots of people thought the economy was taking off, and investors were running for the classic food and drug stocks, the ones you don't need a strong economy. they were headed toward the cyclicals. caterpillar, cummins, united technologies. that kind of rotation is usually the death knell for stocks that typically go higher only when the economy is slowing. however, tim collins, on an off the chart segment said, you know what, jim, you have to take a hard look at pfizer because its stock was tracing out a reverse head & shoulders pattern. the world's largest pharmaceutical company would be precisely the kind of company that i would shun. i would normally never touch this thing when the economy is speeding up. abo
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but if you take a look at this chart, you can see pfizer traced out a left shoulder and then started declining aggressively in. in november, the stock bottomed to ford the head. then in december it caught a rally and then a pullback to create the right shoulder. the key with this pattern is the neck line, the line that connects the head to the two shoulders. when a stock breaks out above that line, it tells the technician you are about to witness a big, big move. pfizer's neck line was at $25.80 and col ngz predicted it could be in for a monster run. given that money was pouring out with the staples and drug stocks heading for the industrials, i was confounded by this bullish head & shoulders pattern. i didn't trust it one bit. come on, i'm the king of rotations. i knew it was a bad stock. but collins said rotations, smotations. you're going to close your eyes and buy the stock because something big was going on that could make it buck the market's prevailing trends. sure enough, he was right. i was wrong.
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the stuck almost instantly jumped more than 10% after col nsz told me to buy it with both hands. what caused the move? soon after collins flagged this bullish reverse right here, the reverse head & shoulders pattern, the huge drug company decided to spin off its animal health division. it was a shocker. into a new and publicly traded company called zoetis in a move that created $15 billion in value. who knew? the chart did. here's the bottom line. patterns matter. when you see head and shoulders pattern no matter how confident you might be in a situation, don't take any chances. sell, sell, sell. and when you see a reverse head and shoulders developing, even if it makes no sense when it comes to which stock it is happening to, you got to consider buying some. that's how powerful these moves are, and the chart work on these two patterns is vindicated far more often than the skeptics would ever think possible. stay with cramer! ur insurance cpany
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we've run the gamut of technical trading tonight on this special show, including some of the basic patterns like the head and shoulders and reverse head and shoulders setups. but those patterns aren't the only chart patterns that can be relied on to tell us the true when the fundamentals give us little insight into the direction of stocks. one chart type we've come to love on "mad money" it's what's known as the cup and handle pattern. we've seen it so often, it's been so reliable, and i've used it to keep myself in stocks that otherwise i might have been turned off on or shaken out by. take the stock of cramer fave dominoes. we got behind it when it traded down to ten bucks and were feeling pretty darn greedy when it traded up to 30s. the stock exhibited some sideways action and began to
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drift down on no new news. i hate these kinds of turning situations. why? i'm always paranoid to believe something might be happening and i don't know about it and other guys do. when the analysts are iffy and splits as was the case with dominoes in the 30s and the company isn't talking, that's when the technicians are most needed. so i went to ed ponce and asked for his help to divine if domino's moment had no come and gone. take a look. here's what he sent us at the tile. when we reached out to him, the stock had begun to drift back up. you know what, we would have blessed telling you to sell. we thought the thrill might have been gone here. make you should ring the register. so tempting right there. uh-uh. in fact, ponce told us to do just the opposite. that little advance back up was the sign he needed that all was well. he said it was a very special moment and he was anxious to show us why. with that return back up to, say, 36, okay, dominoes was tracing out a perfect cup and
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handle formation. that's right. a pattern we had found as reliable as head and shoulders in its predictability. you kauts the beginning of the cup at 36 bucks and a general slope down to 28 where the base of the cup was, okay. i was really nervous right there. he told me not to be. the stock then climbed back to 36 to create the right side of the company, and then we got a little sidling to 37, 38, and that would be the beginning of a handle that almost always signals a much higher move. handle. the handle always goes like that. very reliable. sure enough, ponce's work nailed it. it turned out that the stock was simply consolidating. it was ready to power higher on the next big move. this was positive action. dominoes right there, what they were doing, they were embracing technology. the web and the cell phone, facebook, eliminate order
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takers, let customers place ordered directly via the net. we would have left a minimum of a double on the table if it weren't for ponce's guidance. i had to go back when i was concerned about another one of my favorite stocks, monster beverage. i thought it couldn't go higher near the end of 2011. i needed a chartist to give me the skinny because i kept hearing that red bull competition was crimping monster and that there was the distinction possibility of regulatory intervention. ed set me straight. he said that for months the stock of monster had been bouncing off its 100-day moving average, the blue line you can see. every time it looked like it was going down, it rebounded. look at this. rebound, rebound, rebound, rebound. he said monster was tracing out a series of triangles, also known as flag patterns, where you get a flat ceiling of resistance and an upward sloping floor. see that? when the stock hits the new line of resistance, it punches right through. he said that anytime you get these pennant formations that
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are preludes to a continuation pattern, you do not have to worry about a stock running on empty. as a matter of fact, you got to buy this thing both hands every time. the stock hit 49 and proceeded to jump to 79, confounding the anyway sayrers, including nume ru -- numerous short sellers. ultimately monster bought coca-cola. once again, i would have been shaken out of this stock's move if it weren't for ponce and his chart handholding. there are a lot of variations of these different triangle and pennant formations. for instance, take a look at this chart. big move up. citigroup. everybody had it in june 2010. he loved this right here. this is what's known as a wedge pattern. collins finds it as reliable as the pennant and the triangle patterns. we've also had tremendous success following the works of
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carolyn ba rhoden. she uses ratios found in nature. you've heard of vib na chi patterns. we also like the work of carly garner who uses data from the commodities trading commission. the bottom line, technicians and fundamentalists can go exist, make peace with them both. and i bet you'll make a heck of a lot more money than if you're blind to one or the other and certainly to both. "mad money" is back after the break. rec, naughty and nice lists will serve you well. every week, give a ranking to each of the stocks in your portfolio. know which ones you need to buy more of right away, which ones you need to get rid of no matter what. and which stocks can wait for a better buying opportunity.
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stay disciplined, watch the market and stick to your plan. remember, discipline trumps conviction. happy holidays from all of us here at "mad money."
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hey, cramerica, finding big moves and the meaning behind them. on twitter, what's trending can also tell you a lot.
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today i'm counting down some of your top tweets to see what's trending. first up, we have a feel good tweet from watt dee thompson. thank you @jimcramer for all got advise. thanks to your books and hard work. i retired at the age of 55. you know what, i want you to continue to own a lot of stocks. you're not going to get a lot of income from other activities, from other bonds. and stocks compound. you get that dividend. keep reinvesting. here @src tweets my 19-year-old son wants to start saving for retirement. do you have any advice? unfortunately it's boring. we're going to start with an s&p index fund. not going to recommend any particular one. once they've put $10,000 aside, then they can focus on individual stocks. them's the rules. i'm not varying them. next a shout out from watt hsg drip. don't let the haters get to you, jim. keep doing what your doing. stay above their pettiness. periodically i get tired too, and i get a little angry, and i
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get a little feisty. but what i am like is that this is my little zone here, right? it's all nfl. you come into my box, you're going to have to be tackled. i'm not looking the other way. next up, @villa marin writes, you want no investors to max out on index funds before investing in single stocks? again, this show is incorrectly known as some sort of trading show where we don't like index funds. we're an investing show where we demand you be in index funds. sorry for the misinterpretation by you. last but not least, @jack cribener says excited that found the @jimcramer show at a release tifrly young age. the guy is a genius with a load of valuable information for free. i only wish my mom and dad were still alive because then, finally, they can say, hey, i told you, jimmy. stay with cramer.
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hey, i'm cramer. when you buy your loved ones gifts for the holidays, you don't hang on to them forever. why should it be any different for stocks? never turn a trade into an investment. if you buy a stock anticipating a specific catalyst, after that event occurs, don't continue to hold on to it. be disciplined and remember your plan. sell it either way. gain or loss because the minute you start justifying a trade as an investment, you've already lost. there's always a bull market somewhere, and i promise to try it for you on "mad money" week nights at 6:00 eastern on cnbc.
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all right. i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money." i'm jim cramer, and i will see you next time! bugs... -(theme music playing)
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-i'll get it. -...scrubbing toilets. -that's it. -it's all in a day's work... -(revs) -...when you're a millionaire. these folks invest in hedge trimmers, not hedge funds. they turn d.i.y. into r.o.i. and thanks to hard work, incredible passion, and a whole lot of mud, sweat and tears. they've turned their dirty jobs into filthy riches. -smells like money! -tonight, meet a concrete pourer who paved his way from a humble shed to a $4 million mountain retreat... -this is what dreams are made of right here. -...a rodeo racer who turned a lifelong love of horses into a seven-figure steed empire,

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