Feeling closed off from this hot market? Maybe you have some kind of FOMO, or fear of missing out. you are not alone. After posting its best monthly gain of the year in November, the S&P 500 continued to set new record highs in the first week of December. But this buying is pushing the market into overbought territory, according to the S&P 500 Short Range Oscillator, a technical indicator that Jim Cramer has used for decades to track trading momentum. . Our discipline requires us to consider locking in profits in overbought markets, as we did with Microsoft, one of our big winners, on Tuesday. However, you also choose where you buy. On Wednesday, we bought more shares of Bristol-Myers Squibb, our latest position, following the recent decline. As long-term equity investors, we believe that fundamentals are paramount when making investment decisions. However, it can also be helpful to take a peek at the technicals. METHODOLOGY We view this technical from the perspective of a new money investor looking to start a position, or someone who has an existing position in the loss margin and where another purchase could help lower their cost basis. We are doing an analysis. For those with existing positions, this exercise can help you decide when is the right time to consider a basis break if you feel you need a little more exposure. However, it is a violation of our discipline and should not be done lightly. Our analysis can also notify members when these stocks are trading at so-called “battlefield levels” and may prompt them to adjust their exposure accordingly. We looked at the charts of Constellation Brands and Home Depot, two of the 1-rated stocks rated Buy, to identify buyable levels. Constellation Brands Buy Level: $230, $210 The Mexican beer powerhouse on November 26 successfully tested $230 per share, its key technical support level for the past two years. There is also a long-term uptrend occurring at the $230 level, which is represented by the pink line. A support test in late November was conducted as trading volume increased. We view volume as some kind of stock lie detector. This is because the higher the volume, the more reliable it is to move. From a price-to-earnings ratio perspective, we already like the stock. And as Jim Cramer pointed out in a morning meeting for club members: Nov. 26: Constellation’s cash flow alone is reason enough to be interested in the stock at this level. On a fundamental basis, the stock is already well below its valuation over the past five years based on 2025 earnings estimates. However, technically, the stock is currently below both the 50-day moving average and the 200-day moving average. This means there is resistance above $242 and $250 before the stock challenges all-time highs. Fundamental concerns about President-elect Donald Trump’s proposed 25% tariffs on Mexican imports on Monday night are certainly a consideration that cannot be ignored, but the stock is well below its historical average (forward P/E) of 15.8x. It’s probably priced in, given that it’s trading at about that level. In the past five years, it was 19.6 times higher. Constellation’s stock price fell more than 3% on November 26, the day after President Trump’s announcement, which is interesting because investors couldn’t understand how they would be surprised by President Trump’s tariff plans. It was. That’s why Jim said this stock is a buy on the downside. At the Morgan Stanley Consumer and Retail Conference, Constellation Chief Financial Officer Garth Hankinson said Tuesday afternoon that several steps need to be taken to address the tariffs. He cited ways to balance accelerating cost reductions, ensuring sufficient supply in the U.S., and gradually increasing prices. That possibility is being considered, but no decision will be made until a rate plan becomes policy. Hankinson’s comments came shortly after the company announced it would sell its vodka brand Svedka. This is a positive move to address Constellation’s struggling wine and spirits business. If $230 fails, there is not much support between the $230 level and $210, and to some extent this is where we will see the previous low in January 2023, i.e. where the uptrend line begins. must proceed with a heightened level of alert. Especially when emotions rule stock prices and investors become “sell first, ask questions later” over Trump’s random tweets about tariffs. Home Depot Buy Levels: $418, $406, $375, $370 We see some interesting technical levels, including $418 per share, which was the stock’s all-time high until its recent breakout. For many engineers, testing breakouts is a necessity. This happens when a stock rises above a previous high, like it is doing now, and then returns to that previous high and finds support, or buyers. This could then be considered confirmation that the break is real and available for purchase. In other words, from a technical perspective, rather than buying this breakout here, you should buy the rebound from the old highs, especially if volume increases. The first level to purchase is the $418 level. However, keep in mind that this is just over 2% from where the stock traded on Wednesday. If you don’t have any positions at all, you may be interested, but if you do, we recommend waiting until there is a bigger decline, ideally an improvement in your overall cost base. From there, we arrive at $406, and from there we get the 50-day moving average. Note that if a stock is trading above the moving average, it is considered support, and if the stock is trading below the moving average, it is considered resistance. Essentially, long-term bond yields are expected to ease some on Wednesday, and mortgage rates could fall further this week. Last week, mortgage interest rates fell and demand for mortgages surged. Continued low mortgage prices should encourage home construction and home buying and selling. We believe Home Depot is the place to be when it comes to selling the materials and equipment you need to build a home, as well as the tools you need to remodel. If the stock price falls below the $406 level, we will focus on the $375 to $370 area. $375 is where we see the start of an uptrend dating back to October 2023. And $275 is where the 200-day moving average comes into play. Since the stock is trading above its 200-day moving average, that level is considered technical support. (The Jim Cramer Charitable Trust is long STZ, HD, BMY, MSFT. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, Jim makes trades. Receive trade alerts before. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
Exterior of the New York Stock Exchange on September 18, 2024 in New York City.
Stephanie Keith | Getty Images
Feeling closed off from this hot market? Maybe you have some kind of FOMO, or fear of missing out. you are not alone.
of S&P500 After posting its highest monthly profit of the year in November, it continues to set new record highs in the first week of December.
