Ready for a big stock rally?
The charts show a market set to break out, with some shares hitting definitive bottoms and others already taking off.
By Jim Cramer, TheStreet
Is this the bearish investors' last stand? Or just too much enthusiasm in a holiday-addled week?
After an exhaustive look at every chart in the S&P Trendline's Daily Action Charts, my takeaway is that bearish investors will have to push the market back this week, because soon we'll see so many breakouts that the bears will be like Custer. Then it could be all over, and the market could rally 10%.
There's so much on the line for bearish investors who have mauled us every time it looked like we would break out. Right now, given good recent economic data, those bears look surrounded.
The charts show an extraordinary turn from just two weeks ago, with whole groups' charts going from struggling, almost lethal pictographs to what look like definitive bottoms, bases for taking off, outright breakouts and -- in some cases – blast-offs that show no signs of retrenching. Let's call these the four B's.
We'll start with the blast-offs. Bearish investors are going to have to rout these extraordinary runs because these stocks are beckoning others onward and embody tremendous themes that have held up throughout this tough, tough year.
The first is Salesforce.com (CRM), which represents anything and everything cloud computing.
We know the cloud isn't going away. In fact, with Salesforce.com dominating cloud software, the fight is now definitively over cloud hardware, as defined by the brutal war of attrition between Dell (DELL) and Hewlett-Packard (HPQ) over 3PAR (PAR).
VMWare is in blast-off territory for certain, even as EMC lags. We have so few pure growth companies like VMWare that we overvalue them, but VMW's overvaluation doesn't extend to its parent EMC, because people view EMC as a slow-growing plodder, a la Hewlett-Packard (HPQ). People forget that EMC owns almost all of VMWare.
What to buy? I would take a shot at NetApp (NTAP) here simply because, although it has moved a great deal, it has to be the most desirable play in the cloud-related book.
Also ready to blast off is Internet video, which is clearly the next path, even as people can't seem to migrate the PC to the TV with any real precision unless they are 18 years old. (I am sure many of you are saying, "Hey, I can do it, too." Take it as gospel, though: You are in the Apple (AAPL)-led minority.)
The charts say it is just a matter of time, and Akamai (AKAM) is the standout best-in-show blast-off play.
Citrix (CTXS), with on-demand video, also has caught the Akamai bug, and the bidding-up of this monster stock has surprised everyone who recalls its multiyear swoon, even as its product suite seems relatively unchanged.
Swift Internet video needs traffic directors, and F5 Networks (FFIV) once again stands out as the traffic light of the Web with absolutely no signs of abating whatsoever.
As I have said on "Mad Money," Akamai, F5 and the aforementioned VMWare would be worthwhile replacements for Express Scripts (ESRX) and Intuitive Surgical (ISRG), the dogs of the CANDIES (Chipotle Mexican Grill (CMG), Apple, Netflix (NFLX), Deckers (DECK), Intuitive Surgical, Express Scripts and Salesforce.com).
What to buy? Akamai on a pullback remains the best bet. The players are so few on this kind of product -- scarcity value remains key -- that I don't want to fool around.
What's bizarre here is that we keep hearing that deals don't really matter and that they're isolated. But then I look at stocks like Verisign (VRSN), Radware (RDWR), Check Point Software (CHKP) and Bryan Ashenberg favorite ArcSight (ARST) (rumored to be for sale), and I am shocked that people don't recognize this as more than the typical one-day blip that accompanies a takeover in a thought-to-be-moribund sector.
Funny how Intel is punished for buying a company in a sector that is now red-hot because of Intel. Especially because, if you believe Intel, this is the back door into cell phone technology.
Has anyone even thought about how Intel could be so blindsided by a bigger trend than the Internet tsunami that includes cell phones? They should have just bought ARM Holdings (ARMH) -- at least they would have locked in Apple for now.
The laggards are Symantec (SYMC), a terribly run company, and Blue Coat Systems (BCSI), which was recently hailed by reporter James Rogers in an important piece on TheStreet that also discussed Check Point Software. I like Blue Coat as being unheralded. I can't get behind Symantec, because I think Intel-Mcafee is just too dreadful a combo for the company.
The blast-off we have seen for CANDIES component Chipotle has been monumental, until you consider that it is "only" $5 billion in market cap. Sure, that's a market-cap premium to Burger King (BKC), but the rules I wrote about earlier about EMC also apply to Chipotle, which was once a part of McDonald's (MCD).
The purity of growth that Chipotle provides is unmatched. I would like to say that it is pulling the whole restaurant group up, but that would be wrong, as I think the Burger King deal is playing a bigger role. The secret sauce for Chipotle is that it is both fast food and healthful food.
To that extent, the best plays off this are Hain Celestial (HAIN), which reported a terrific quarter despite being targeted for a miss, and Whole Foods (WFMI), which seems stalled and unable to break out, although that could change.
At the time of publication, Cramer was long Apple, EMC, Intel and McDonald's.
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