by Abigail Stevenson
Just as the highest growth stocks in the market started to roll over, Jim Cramer was surprised to see that one of the slowest growing sectors out there has started to flying. Believe it or not, the old tech stocks are making a comeback.
“After weeks of turmoil, we can not only spot the stocks that money is flying out of, we can also see the areas where money is flowing in, and old tech has been providing new but uncertain leadership in this tumultuous period,” the “Mad Money” host said. (Tweet this)
But is this real, or are the old tech stocks back for the long term?
To find out, Cramer turned to Bob Lang, a technician and founder and senior strategist at ExplosiveOptions.net and colleague of Cramer’s at RealMoney.com.
Lang agreed with Cramer that some of the boring, old-line tech names are now suddenly rising from the ashes. Two of the bigger names that Lang liked are Intel and Microsoft, the two best performers of the Dow Jones Industrial average since the market collapse on Aug. 24.
During that time, Microsoft has rallied 12 percent while Intel has roared more than 20 percent. And when Lang looked at the charts of these companies, he understood what has sent them higher.
Microsoft’s daily chart revealed to Lang that since Aug. 24, it has consistently been making lower lows and the stock’s strength versus the rest of the market has been fantastic. Lang also determined that Microsoft’s trajectory is very positive, with the stock trading above all of its major moving averages and the short-term 50-day moving average above the 200-day moving average.
In fact, Microsoft is only about 10 percent away from its recent multiyear highs, and Lang believes that investors have been crowding into the stock on the bet that numbers will be good when Microsoft reports in a few weeks.
Lang then looked at the daily chart of Intel, which had major lackluster performance earlier in the year. Since Aug. 24, it has exploded but somehow managed to stay under-the-radar. Lang actually found that Intel’s rally has helped to pull up many of the other semiconductor names, too.
Best of all, Lang pointed out that Intel has a power inverse head-and-shoulders pattern in the chart. This is one of the most reliable positive chart formations out there, even if it sounds like a bottle of shampoo.
He found that Intel has just crossed the neckline of the pattern, which means that the inverse head and shoulders formation is the real deal. Based on this bullish formation, Lang thinks Intel can travel up to $35 from the $31.74 where it closed on Tuesday.
The only thing that kept Lang from framing the picture of Intel’s beautiful chart was the fact that the 50-day moving average is still below the long-term 200-day moving average. However, he thinks that could change soon.
“The company reports next Tuesday, and we really don’t know how the quarter is going to be, so if you want to buy Intel, I suggest putting on a little bit of your position if we get some weakness before the earnings report, and then waiting until after the quarter to buy the rest,” Cramer said.
So, if the market gets another big downdraft, Lang’s charts show both Intel and Microsoft can keep roaring. These are exactly the kind of stocks to buy on that downdraft, or even if there isn’t.