On difficult market days, in can be helpful to take a longer view. In the "Off the Charts" segment of Mad Money Tuesday night, Jim Cramer checked in with Carolyn Boroden, who runs the FibonnacciQueen.com website and contributes to RealMoney.com.
Boroden called the recent rally in Tesla (TSLA) back in April, by focusing on the electric car maker's weekly chart instead of its daily one. By doing so, she was able to identify key Fibonacci ratios for the stock's price that told her things were going to turn around. (Fibonacci was the Italian mathematician who observed a series of ratios that repeatedly appear in nature from snail shells to pine cones, and which surprisingly enough hold true in the stock market as well.)
Cramer and Boroden started their latest discussion by looking at a weekly chart of CVS (CVS) , the drugstore operator.
First it seems pretty clear that CVS bottomed not too long ago at its long-term floor of support around $60. This floor represented a cluster of three Fibonacci price relationships, including the 161.8% extension of a prior swing. Once your Fibonacci ratios go above 100%, they're called extensions and Boroden notes that many moves tend to terminate at these extension levels. So there is reason to believe that the bottom early last month will be a lasting one. As long as CVS shares holds above that $60 level, Boroden remains confident, although she suggests waiting for a pullback before actually buying. Boroden sees a series of Fibonacci levels that could represent some resistance: $75, $77, $80, $85, but says it's conceivable that CVS could go all the way to $128 before it runs out of steam.
In the case of Walgreens Boots (WBA) , another drug store operator, shares are still languishing near their lows.
However, with Walgreens trading at $64, Boroden says the stock has a floor of support thanks to a cluster of Fibonacci price relationships running from $59 to $61. She says it won't take much upside for Walgreens to start taking off. With just a bit more of a counter-trend rally, she thinks the minimum upside target is around the $75 to $78 area. If the recent low turns out to be a more important bottom, then Boroden could see Walgreens going to $107 before it hits a 127.2% Fibonacci extension that would likely put a stop to the move.
Finally, Cramer and Boroden looked at the weekly chart of Citigroup (C) . Boroden says that she just found a cluster of at least seven Fibonacci price relationships around the $64 to $65 level and that could prove to be a powerful floor of support.
At the same time, if the stock can get some bounce here, she thinks it could easily shoot up to $72 at a minimum. And if Citi can clear the $72 hurdle, she predicts it will be smooth sailing to the next ceiling of resistance at $84. But in order for this move to happen, the stock needs to hold above that $64 to $65 floor. Otherwise, Boroden's going to throw in the towel.
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