CNBC’s Jim Cramer on Friday broke down new technical analysis from veteran charting expert Larry Williams, whose proprietary market indicators suggest Google parent Alphabet, Amazon and Coca-Cola are stocks to watch.
“Right now, the charts played by Larry Williams suggest that we have some incredible bullish action in Google, some very good bullish action in Amazon, and money-in-the-bank action in what we call knockout, Coca-Cola. I wouldn’t bet against it.” Larry Williams,” the “Mad Money” host said.
Cramer said that judging by Williams’ methodology, Alphabet and Amazon have held up better than other big tech names that have been hit during this year’s market volatility.
Here are three separate analyzes of the current and expected performance of the three companies. Cramer’s analysis of Alphabet is of the company’s class C shares with the ticker GOOG, not to be confused with the company’s class A shares GOOGL.
Here’s a look at Alphabet’s daily chart:
Cramer said the tech company has a “stable support floor,” letting Williams know that Alphabet’s shareholder base has continued to buy shares through the market turmoil. “According to Williams, when a stock stays like this while the broader market is getting hit, it’s one of the strongest patterns he knows of,” Cramer said.
There are more signs that the stock is bullish, according to Cramer. First is the blue line at the bottom of the graph, called the balanced volume indicator, which measures volume flow. This line shows that Alphabet stock volumes remained above January lows in February and March, Cramer said.
Examining Alphabet plotted next to one of Williams’ indicators that measures a stock’s career build, the stock moves sideways while the indicator line rises, another sign the stock is bullish, Cramer said. Here is the graph:
Williams believes “stocks are now bouncing hard off their lows and … have more room to run,” Cramer said, adding that the stock has not performed as well as Alphabet.
Here’s Amazon’s daily chart along with its seasonal pattern, which measures the stock’s typical performance at a given time of year:
“As with Google, this is exactly the time of year that Williams would expect to bottom out based on the calendar,” Cramer said.
While Williams’ analysis suggests Google and Amazon will outperform, Cramer acknowledged that tech stocks’ struggles this year could make those stocks unattractive to cautious buyers. An alternative defensive stock is Coca-Cola, she said.
Here is Coca-Cola’s daily chart plotted with the on-balance volume line:
Williams believes that because volume in the stock has risen even as Coke is down from its highs in the past two weeks, “big institutional money managers are buying it aggressively,” Cramer said.
Cramer added that the beverage company’s seasonal pattern suggests it will hit bottom soon, based on Williams’ analysis. Here are Coca-Cola shares plotted with their seasonal pattern:
“Coke is exactly the type of stock hedge funds love to own at this point in the business cycle, which is a key reason it has been able to outperform the major averages. Williams is betting the outperformance will continue.” Cramer said.
Williams also believes there is a strong correlation between Coca-Cola and sugar, which is a major input for the company, Cramer said. Here is a chart showing that Coca-Cola and sugar prices advanced about a year:
“You might expect stocks to go down after sugar goes up because it’s a major cost of entry for them, but when he goes forward a year, Williams finds that Coca-Cola stock follows sugar. If the pattern holds means that Coca-Cola can continue to recover,” Cramer said.
Disclosure: Cramer’s Charitable Trust owns shares of Alphabet (GOOGL) and Amazon.
Register now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.