by Abigail Stevenson
In a volatile market with daily swings up and down, Jim Cramer always recommends the best way to deal with it is to stick with the consistent winners.
One group that has shown strong outperformance and solid fundamentals are the chemical stocks. OK, maybe it isn’t the sexiest group on the planet, but those gains in your portfolio will feel pretty good if the charts are right.
To find out which chemical stocks are headed higher, the “Mad Money” host turned to Bob Lang, a technician, founder and senior strategist at ExplosiveOptions.net and a colleague of Cramer’s at TheStreet.com.
According to Lang, the best charts are coming from DuPont, Dow Chemical, LyondellBasell Industries and PPG. This group has had some major call option buying in these stocks, which indicates that there is big money flowing into the group. Historically, when a sector gets this kind of attention from institutional money managers, that means some big moves are ahead.
First, there is DuPont, which has been under fire from activist Nelson Peltz to break up. Looking at the long-term monthly chart, when CEO Ellen Kullman took over on Jan. 1, 2009, DuPont was at multiyear lows, under $10.
Since then, the stock has had a tremendous run, and Lang pointed out that whenever this stock pulls back, that is an amazing buying opportunity. Lang thinks the uptrend of the stock will continue, especially with Peltz putting the heat on management to produce additional value.
Next up is Dow Chemical, which recently spun off its commodity business so it could focus on higher-margin proprietary business. Lang pointed out that the stock has been consistently making higher highs and lower lows lately, which is exactly what a technician wants to see in a healthy chart.
The consistent call buying on Dow shows that Wall Street folks think that this stock is headed higher. Additionally, the Dow chart shows that it just finished a cup-and-handle pattern, which set the stock roaring. Lang added that Dow is his favorite stock to buy in the group right now.
LyondellBasell is another high-quality chemical company that has had some wild moves. Since 2011 this stock is up nearly tenfold. It pulled back 50 percent in 2012, which turned out to be an excellent time to buy it. In the past few months it has pulled back again, leading Lang to believe that this is a great time to buy it.
Last, there is Cramer-fave PPG.
“I adore PPG, both the company and the stock, but according to Lang this is actually the weakest of the chemical charts,” Cramer added.
PPG has been giving off a W-pattern since March, and the charts indicate it is about to have a bullish crossover. If that happens, then Lang thinks the stock will break out of its current patterns and go back to $237.
In the end, the market is confusing and at least investors can have some sense of comfort by looking at the charts to see what looks good. Lang sees that the chemical stocks are in a great position right now, especially Dow.