CNBC’s Jim Cramer loves the technology sector, but right now, it’s developing a bad sign: most of the gains are narrowly spread among a few major winners, a sign of bad breadth.
With Apple, Alphabet, Microsoft and Intel driving most of the technology sector’s surge, the “Mad Money” host turned to technician Bob Moreno, the publisher of RightViewTrading.com and his colleague at RealMoney.com, for help sorting out the moves.
“Moreno thinks the fabulous bull market in tech might be less solid than it seems,” Cramer said. “As much as I’m a fan of many tech stocks here … you always need to have a diversified portfolio in case any one particular sector gives up the ghost.”
Moreno’s first suggestion was getting some exposure to the energy sector. In looking at the daily chart of the VanEck Vectors Oil Services ETF, the technician noticed that the ETF is close to breaking above its $26 ceiling of resistance.
In addition, the chart’s vortex indicator, which tracks early trend changes, recently made a bullish crossover (the green line going above the red). Moreno said that means if the ETF can go higher than its $26 ceiling, energy stocks could see a major move higher.
Second, Moreno liked the daily chart of Starbucks. Shares of the coffeemaker had been under pressure for months until last week, when they broke out above their ceiling of resistance.
Even with Starbucks’ slight pullback since then, Moreno liked what the indicators showed: the moving average convergence divergence indicator, which predicts changes in a stock’s trajectory, has been heading higher, and the Chaikin money flow oscillator is showing positive buying pressure.
“These readings make Moreno think that Starbucks’ consolidation phase may be over, with the stock finally ready to make a sustained move higher, this despite a recent shade-down of the company’s long-term growth forecasts when it reported recently,” Cramer said.
From a technical perspective, Cramer and Moreno both agreed that the daily chart of Abbott Laboratories was “a beautiful picture.”
“In fact, Moreno says it’s a picture-perfect uptrend, [with the] stock steadily rising above its 50-day moving average,” Cramer added.
Even though shares have recently been trading sideways, Moreno noticed that the relative strength indicator, which measures momentum, has issued some bullish readings, signaling that the health care stock could soon break out above its $55.50 ceiling and keep running higher.
Of all the struggling retailers, Moreno liked the daily chart of Costco the most. Shares of the wholesale giant recently broke out above their 200-day moving average and soared higher.
“This rally’s been powered by strength in the Chaikin money flow [oscillator] and Moreno believes the stock has much more upside,” Cramer said.
Finally, Moreno suggested Cramer-fave Honeywell for an industrial investment. Both the relative strength and Chaikin money flow indicators show strength in the stock and backing from deep-pocketed investors, the technician noted, adding that the strength shouldn’t stop anytime soon.
All in all, Cramer and Moreno said that all of these stocks seem to have more upside and reflect safer investments than the white-hot tech cohort.
“With the breadth in the tech sector deteriorating, you need to start thinking more about the non-tech parts of your portfolio. And, remember, you should always have a diversified portfolio,” the “Mad Money” host said. “My view? Many of these are definitely worth picking at into weakness, like the OIH [energy ETF], as the market gets hit with what many people see as the long-awaited pullback.”
Disclosure: Cramer’s charitable trust owns shares of Apple, Alphabet, Starbucks and Abbott Laboratories.
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Article Source : https://www.cnbc.com/2017/11/14/cramers-charts-unveil-5-ways-you-should-diversify-away-from-tech.html