- Technical analysis suggests shares of IBM could be in for a rally later this fall, CNBC's Jim Cramer said Tuesday.
- "The charts, as interpreted by the legendary Larry Williams, who's got the hottest hand right now in the business, suggest that IBM could keep drifting lower for the next few weeks," the "Mad Money" host said.
- However, Cramer continued, "he expects it to bottom in late October and then roar higher."
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Shares of IBM could be in for a rally later this fall, CNBC's Jim Cramer said Tuesday, leaning on technical analysis provided by veteran chartist Larry Williams.
"The charts, as interpreted by the legendary Larry Williams, who's got the hottest hand right now in the business, suggest that IBM could keep drifting lower for the next few weeks. But he expects it to bottom in late October and then roar higher," the "Mad Money" host said.
"This is one of Larry's favorite seasonal plays, and as we saw yesterday, you bet against him at your own peril," Cramer said. Cramer was referring to Williams' prescient call earlier in the month that Sept. 17 was the optimal date to sell stocks in order to get in front of what's typically a challenging late September. Wall Street on Monday weathered its worst day in months.
Williams likes to use dominant weekly cycle data for stocks to gauge where they may trade in the future, Cramer explained, and with respect to IBM, the technician sees a 72-week cycle for the shares.
"This year the lows of that cycle should come in late October. If the same pattern holds this year, then that might be the ideal place to start buying this stock on the way down," Cramer said.
The "Mad Money" host also pointed to a chart from Williams that shows IBM's true seasonal pattern. That's represented with the blue line in the graphic below.
"Williams has noticed that IBM tends to be one of the best seasonal bets in the whole market. This is another trade he's been following for nearly 20 years. Time after time, IBM tends to put in a seasonal low near the 20th trading day of October," Cramer said. "You typically get a bottom in this one near the end of next month and that's usually followed by a nice rally."
Another technical indicator that could turn bullish in IBM's favor is what Cramer called the Williams Panic Indicator. It's shown in red in the chart below.
"If you bought the stock every time the panic indicator went above 20 … [investors] racked up some nice gains," Cramer said, noting it's been trending higher toward that key level, but remains short of it for now.
"However, if we get more of a sell-off — and that's what Williams is expecting for pretty much everything — then the panic indicator will soar and that's his signal to buy the stock … hand over fist," Cramer said.
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