Shares of Tesla have been hammered in the past few weeks, prompting Jim Cramer to turn to the charts to investigate if it could impact the rest of the automobile industry.
“The stock has been red hot lately and I hate to chase, which is why I think the pullback Moreno is predicting could be your best buying opportunity in ages,” the “Mad Money” host said.
Looking at the weekly chart of Tesla, Moreno noticed a pattern that tends to repeat for the stock. It has 43-week-long cycles where it fails to break out past old highs, sells off hard, and then rockets back up. Then the whole process starts over again.
Nearly every time, the cycle ends with Tesla getting close to its ceiling of $285, with the stock making what is known as a high wick or upper shadow exhaustion candles, meaning it reaches levels intra-week but doesn’t hold them.
In Moreno’s view, the cycle has now occurred four times, and Tesla could be ready to go through it once more and eventually rebound. He didn’t foresee Tesla hitting its $285 level again until around November. He thinks it needs to potentially go as low as the $160s before it can work its way higher again, and unless it can clear the $285 hurdle in 8 months, it could cycle itself again.
Moreno recommended selling Tesla at current levels, because he thinks the recent decline is just the beginning of a long-term sell-off.
“I would love it if Tesla trades down below $200,” Cramer said.
So, while Tesla seems to be losing its mojo, Moreno thinks Ford and GM are ready to roar higher.
Ford’s stock has been in a downtrend since the summer of 2014. Lately it has been consolidating in a narrow range, and fighting to break out above its long-term ceiling of resistance for months.
Even better, the charts recently made a golden cross pattern, where its short-term 50-day moving average crossed above the long-term 200-day moving average. This is a very bullish sign that the stock’s performance is improving.
Based on what he saw in the chart, Moreno also noted that he thinks GM will break out to the upside again, and it could happen soon. The MACD line also made a bullish crossover last month, and the Chaikin money flow oscillator is moving in positive territory, meaning large institutional buyers are acquiring the stock.
Ultimately, Moreno recommended buying GM if it can close above its ceiling of resistance at $38.25. At that level, he could see it easily headed to gain another $4.
“Given that GM is selling its money-losing Opel division, I couldn’t agree with Moreno more,” Cramer said.
Watch the full segment here: