Breakouts in blue-chip stocks tell the story

Few things are as bullish as stocks breaking above the ranges they have traded in, and big-cap names like McDonald's and IBM are hitting levels we’ve never seen before.

By Jim Cramer Dec 8, 2011 10:46AM

the streetImage: Arrow Up (© Nicholas Monu/iStock Exclusive/Getty Images)Breakout!

 

Sometimes it hits you like that. You will be watching the ticker go by and you will say, "Holy cow, did I just see a 4 handle on Home Depot (HD)?" Or, "Wait a second, did McDonald's (MCD) just take out $95? Is Verizon (VZ) finally out of the $35 orb? IBM (IBM) about to take out $200? No way!"

 

That's where we are right now: Stocks are hitting levels we haven't seen before -- not "haven't seen in a while" . . . never before.

 

Few things are as bullish as seeing stocks break out of the ranges they have traded in, and in this market the range handcuffs have been horrendous. Stocks hit these ceilings and it is almost as if it is the kiss of death. How many times has DuPont (DD) been rebuffed from $50 in the past three months? Does anyone think that Disney (DIS) can actually take out $40? Can American Express (AXP) punch through $50?

 

Those are more the lingering-doubt trades that want us to take profits instead of the stay-the-course strategy that has worked so well for MCD, IBM, HD and now others as the move broadens.

 

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Why does this matter? Why do breakouts mean so much? I think it's because of the "fool me twice, shame on me" factor. Meaning that it has become a sucker's bet to stay through the course for so many stocks only to see them go right back to the bottom end of the range in a heartbeat. The idea that this time is different and the move will last has been costly, except for some of these breakouts.

 

But if the frequency of breakouts increases, it emboldens you into thinking that something big could be going on here.

 

If you want to look at stocks in the aggregate, you can see what I mean. After tracing out a horrendous head-and-shoulders pattern from the dark days of summer until the end of November, where it looked like the right shoulder was going to produce a dramatic breakdown, we've been on a tear up. In fact, now the prevalent pattern is a reverse head-and-shoulders, with the right shoulder upon us.

 

So tempting ... except we saw that same pattern developing at the end of July before things really fell apart. Identical pattern.

 

I have, like everyone else, been impressed with this rally. I have, like everyone else, seen some of these breakouts. But I also have, like everyone else, become quite skeptical every time we get here and are thrown back.

 

There's one big difference, though. We haven't been thrown back from a couple of big-cap stocks this time. We've taken out the highs in HD and IBM and MCD. They look like real breakouts.

 

And it makes me feel that we aren't done yet. That there are more ahead, if we can just find those doing as well as HD, IBM and MCD. Unfortunately, there aren't many of them. Fortunately, they do break out though -- something that hadn't been happening for most of 2011.

 

Random musings: Put Intel (INTC) on that list of stocks that finally seems to be able to complete its assault of the next level. Getting past $25 has bedeviled it. Now Intel, included in the new Apple Macs, looks like it can finally breach that elusive territory.

 

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long DuPont and IBM.

 

jim cramerJim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for his charitable trust.

28Comments
Dec 8, 2011 2:56PM
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Cramer, now you are bullish?? Last week "it was get out of this market"

Do you have a clue?? With all of your knowledge it appears that you have a 50/50 chance of getting it right.

JUST LIKE US NO NOTHINGS.

I can no longer afford to believe in you!!

Dec 8, 2011 12:07PM
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no knowledgeable investor listens to this fool but we must keep pointing out

his scam so no more new investors get taken by this prostitute

Dec 8, 2011 12:07PM
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corzine will join the list of goldman crooks to escape prison. these politics hacks/shills are what is wrong with our market. 'throw the bums out',tune out the political hacks and shills at cnbc (kiernan,sorkin,cabreera,kudlow) and jail corzine and the rest of the wallstreet crooks. Buy American and support our Troops.
Dec 8, 2011 11:29AM
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fool me twice? you've been fooled way more than twice

Dec 8, 2011 11:06AM
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"Saving the Banks."  "Money Printing."  "Inflationary Announcement" --  These are just a few of Cramer's favorite things.  (from SotS 12/8)
Dec 8, 2011 2:21PM
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Wasn't this guy touting dow 8000 last week?
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Oduffus quote from last nights speech:

“This country succeeds when everyone gets a fair shot, when everyone does their fair share and when everyone plays by the same rules,”

The same rules???????, like GM, like Chrysler, like the UAW, like ACORN, like the black panthers, like SEIU, like congressional insider trading, like the banks, like the 2200 "special exceptions" to Otardcare, like THE ILLEGALS THAT THE AMERICAN PEOPLE ARE FORCED TO PROVIDE FOR, WHO ARE A DIRECT RESULT OF HIGHLY PAID REPRESENTATIVES THAT REFUSE TO ACKNOWLEDGE, AND ENFORCE..............THE LAW........ AND MORE IMPORTANTLY SET THE EXAMPLE THAT THEY THINK THAT THEY ARE ABOVE THE LAW!

OOOH,.......... T H A T ...........KIND OF "SAME RULES"!
Dec 8, 2011 11:58AM
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Jimmy : You being a Harvard educated person must  have heard the story of the little Boy that Cried Wolf.  Meaning I'll keep my eye's, and ears open, but your rants and raves are  just you Jimmy . Write another book. Sale  that new bull, you say your looking for,    Go jimmy go , hasta nunca

 

Dec 8, 2011 3:53PM
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the only breakout in this guy's future is when he tries to break out of jail
Dec 8, 2011 3:50PM
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sold my OIH at 127 when the not funny comic said it was time to buy oil services

 

when is this creep going to admit his best stock of the dow 30 in 2011 alcoa, which is down WAY more than the dow(50%) proves his lack of rigor and inability to pick individual stocks 

 

 

Dec 8, 2011 3:45PM
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75% of a stocks movement is based on the overall market (William O'Neil, Publisher of Investor's Business daily), This breakout (as Cramer calls it) is nothing more than euphoria (and misplaced euphoria at that) over the supposed resolution to the european debt crisis which we are no finding was no solution at all). My outlook has not changed: the worst is yet to come.
Dec 8, 2011 3:49PM
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Interesting that all but one of the stocks referenced Cramer's article are down. Which means that he's probably goiung to say in his next article, "Don't be fooled by false breakouts."
Dec 8, 2011 1:33PM
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buy my book and learn that the market goes up...no the market goes down

yes i know about xyz but nobody could know about their accounting irregularities

buy my book subscribe to my site the market is going up ...wait now its going down

sorry about aa,jnpr,nyx,shld,unh,and numerous other gap downs.....sorry sorry

i admit my errors...buy my book ...wait my masters are calling with another pump and dump

listen to my unfunny jokes as my picks gap down

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That's where we are right now: Stocks are hitting levels we haven't seen before -- not "haven't seen in a while" . . . never before. 
It's all part of my master plan to trash the world economy. I have a reverse Midas touch every stock I buy goes down. I have not gotten around to MCD or IBM yet. When I get all the DOW stocks watch it hit like 1,000.



Dec 8, 2011 5:11PM
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Cramer must have been in the control group when a monkey successfully picked better stocks years ago. Idiot.
Dec 8, 2011 11:25AM
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the unfunny, self lover,can't wait to talk over you may be calling a short term top  
Dec 8, 2011 12:50PM
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Jimmy have you been smoking dope with Corzine this morning ? That blue chip bull,, where did the money go,, is blowing  out of something ........... and into the pockets of the wrong guys ..   Some things are left best unsaid    ,,,     hasta nunca
Dec 8, 2011 3:35PM
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Repeat after me.  Not gonna happen.  I'm an idiot.    Once again repeat after me.   Not gonna happen.  I'm an idiot. 
Dec 8, 2011 7:24PM
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As of December 5, 2011 the United States Bill of Rights is officially dead. This story should be breaking news but it's not.  As you look into this bill and what the passing of this bill means, the reason why this story is not breaking news should be obvious. The bill is Senate Bill 1867 - The National Defense Authorization Act

What exactly is this bill about?  Well, here is how Mike Adams, the Editor of Naturalnews.com, described it in a newsletter: "In a stunning move that has civil libertarians in total disbelief, the U.S. Senate has passed a bill that effectively ends the Bill of Rights in America. This bill, passed in a 93-7 vote, declares the entire USA to be a 'battleground' upon which U.S. military forces can operate with impunity, overriding Posse Comitatus and granting the military the unchecked power to arrest, detain, interrogate and even assassinate U.S. citizens with impunity.It's being called the most traitorous act ever witnessed in the Senate, and the language of the bill is cleverly designed to make you think it doesn't apply to Americans, but the end of the bill essentially says it can apply to Americans 'if we want it to.'
Dec 8, 2011 5:48PM
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corzine,do nothing congress,goldman,madoff,cnbc. dump all of them.
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