CNBC’s Jim Cramer on Friday broke down the latest technical analysis from veteran chartist Larry Williams, whose proprietary market indicators suggest Google parent Alphabet, Amazon and Coca-Cola are stocks to watch.
“Right now, the charts, as explained by Larry Williams, show that we’re seeing incredible bullish behavior in Google, very good bullish behavior in Amazon, and funding in what we call a knockout Coca-Cola Bank action. I wouldn’t bet against Larry Williams, says “Mad Money” host.
Cramer said Alphabet and Amazon have outperformed other big tech companies that have been hit hard during this year’s market volatility, based on Williams’ methodology.
Below are three independent analyses of the current and expected performance of the three companies. Cramer’s analysis of Alphabet is the company’s Class C stock under the ticker GOOG, not to be confused with the company’s Class A stock, GOOGL.
Here’s Alphabet’s daily chart:
Cramer said the tech company has a “solid bottom line of support,” letting Williams know that Alphabet’s shareholder base continues to buy shares amid market volatility. “According to Williams, when a stock is so strong when the broader market takes a hit, it’s one of the strongest patterns he’s ever known,” Cramer said.
Cramer said there are more signs that the stock is bullish. The first is the blue line at the bottom of the chart, called the balance volume indicator, which measures volume flow. The line indicates that Alphabet’s stock trading volume remained above January’s lows in February and March, Cramer said.
When examining Alphabet next to one of Williams’ indicators of professional accumulation in stocks, Cramer said the stock was moving sideways when the indicator line was higher — another sign of bullishness for the stock. Here is the diagram:
“The stock is now bouncing off the lows, and … it has more room to run,” Cramer said, adding that the stock has underperformed Alphabet.
Here’s Amazon’s daily chart next to its seasonal pattern, which measures how the stock typically performs at specific points in the year:
“Just like Google, this is exactly the time of year Williams expects to be based on the bottom of the calendar,” Cramer said.
While Williams’ analysis suggests positive performances from Google and Amazon, Cramer acknowledged that tech stocks’ struggles this year could make those stocks unattractive to cautious buyers. Another defensive stock is Coca-Cola, he said.
Here is the daily chart of Coca-Cola, drawn with the Balance Volume line:
Williams believes that despite Coca-Cola’s pullback from the highs of the past few weeks, “large institutional fund managers are aggressively buying,” Cramer said, as the stock has seen increased volume.
Cramer added that, based on Williams’ analysis, the beverage company’s seasonal patterns suggest it will bottom out soon. Here’s the seasonal pattern for Coca-Cola stock:
“Coca-Cola is exactly the kind of stock that hedge funds like to own at this stage of the business cycle, and that’s a key reason it has been able to outperform the major averages. Williams is betting that this outperformance will continue,” Clay said. silently said.
Cramer said Williams also sees a strong correlation between Coca-Cola and sugar, which is the company’s main input. Here’s a chart showing that both Coca-Cola and sugar prices have risen for about a year:
“You might expect inventories to fall after sugar rises because that’s a major input cost for them, but when you push the data forward a year, Williams finds Coke stock following sugar. If that pattern holds true , which means Coca-Cola can continue to bounce back,” Cramer said.
Disclosure: Cramer’s charitable trust owns shares in Alphabet (GOOGL) and Amazon.
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