With the 10-year Treasury bond yield slipping below 2%, which stocks should be on investors' shopping lists? Here's what Jim Cramer said, "It's complicated," but he offered up some ideas on his Mad Money program Thursday night.
In this environment, investors can afford to be patient however, so there's no hurry to rush out and buy. Next, he said U.S. companies with scale can still work. Think Yum Brands (YUM) , Costco (COST) and RH (RH) , all of which have little to no Chinese exposure as well.
Let's peek at three charts just to get a feel for when we should look to be a buyer.
In this daily bar chart of YUM, below, we can see can see an uptrend the past 12 months. Prices gapped higher the other day in what could turn out to be a spike with an exhaustion gap. A retreat to retest the rising 50-day moving average line may be a buying opportunity if the decline is dragged out several weeks.
The rising 200-day line is another location that may be a buying location in the $100 this fall. I just gave your two locations and two time frames. What's up with that? It all depends, in my opinion, how long the broad market corrects.
Meanwhile, the On-Balance-Volume (OBV) line is rising and the Moving Average Convergence Divergence (MACD) oscillator just turned up to a fresh buy signal.
In this daily bar chart of COST, below, we can see a stock that is showing a bit more weakness than YUM.
The slope of the 50-day moving average line is starting to crest and the OBV line is weakening. The MACD oscillator has turned lower to generate a take profits sell signal.
COST could pull back to key support in the $250-$240 area in the weeks ahead. With the 200-day line intersecting just below $240 now, this area may become a level to approach the long side, but let's not be in a rush.
In this daily bar chart of RH, below, we a very different trading pattern. Instead of a clearly defined uptrend for RH we see an irregular sideways pattern.
The current rally does not mirror the board market and only gets going in June. After a gap to the upside in June the trading volume dries up and the OBV line struggles to move higher.
This is not the kind of pattern I like to see so I would not be looking to put RH on a shopping list for now.
Bottom line strategy: Creating shopping lists for the stock market is a good idea so you can be ready to execute purchases when the market turns. With any list you need to be flexible in case the story changes or you find a better, more compelling story. In the meanwhile I would keep your powder dry.
