Inverted bond yields have historically been a bad omen for the stock market, Jim Cramer admitted, but as he mentioned at the beginning of Thursday's "Mad Money" show, there are reasons why global investors are flocking to U.S. bonds for safety.
On the off chance he's wrong, however, Cramer told viewers they should consider buying shares of Alcon Inc. (ALC) , the eye-care company that makes contact lens solution, surgical equipment and other products.
Alcon was recently spun off from Novartis (NVS) . Cramer said Alcon has a number of things going in its favor, including aging baby boomers, a rising global middle class and a host of new innovations that consumers love. Shares trade for 28-times earnings, which is a premium compared to a company like Johnson & Johnson (JNJ) at 14 times earnings, but only Alcon is a pure-play on this exciting and growing market.
Let's see how the charts look.
In this daily bar chart of ALC, below, we don't have a lot of price history to work with, but we can see a positive set-up. Prices have been trading sideways since early May and have held up decently as the broad market has slumped. Prices are above the 20-day and 50-day moving averages, with the 50-day line showing a bullish slope. The On-Balance-Volume (OBV) line shows a rise from April and suggests that buyers have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator gave a cover shorts buy signal last week.
In this Point and Figure chart of ALC, below, there has been enough accumulation for an upside price projection of $72 - new highs for the move up.
Bottom line strategy: Traders could go long ALC on strength above $62 risking below $59 with a $72 price target.
JNJ is a holding in Jim Cramer's Action Alerts PLUS member club.