This earnings season has seen some high-quality stocks punished for miscues on their conference calls, such as Caterpillar's suggestion that the first quarter would be its "high-water mark" for the year, Jim Cramer told his Mad Money audience on Tuesday.
To get a better sense of whether the selloffs in Caterpillar (CAT - Get Report) , Boeing (BA - Get Report) and United Technologies (UTX - Get Report) represent genuine buying opportunities, Cramer took a closer look at the charts with Bob Lang, the founder of ExplosiveOptions and a contributor to TheStreet.com's Trifecta Stocks newsletter.
Lang told Cramer the selling in these three former market darlings was premature because the numbers look good and the technicals look even better.
Cramer and Lang started with the daily chart of Caterpillar. The stock had a strong run last year before going into a tailspin in late January. When CAT reported a few weeks ago, they made their "high-water mark" comment and the shares were subsequently hit hard. Lang says Caterpillar's back in a consolidation area, trading between $139 and $152. He believes that if the stock can break out above $152, it could be smooth sailing right back to CAT's old ceiling of resistance in the $160s.
Caterpillar started bouncing on Friday and that bounce continued Monday on high volume. Still, when you look at the Williams %R oscillator at the bottom of the chart, which measures when stocks have gotten overbought or oversold, CAT's still near the midpoint. In other words, the stock has more room to run before it gets overbought. At the same time, the Moving Average Convergence Divergence indicator, or MACD, which helps technicians detect changes in a stock's trajectory before they happen, just flashed a buy signal Monday, where the black line crosses above the red one. Lang believes Caterpillar can rally $3 from here, break out over its $152 ceiling of resistance, and then coast to the $160s.
Lang and Cramer next looked at the daily chart of Boeing. Boeing's rally lasted until late February, when fears of an escalating trade war with China took hold, raising concerns about one of the company's key markets.
Boeing was hit again when it reported results two weeks ago. While it did rebound, the stock is still 34 points off its highs. According to Lang, Boeing is consolidating here. Lang likes that the stock has been bouncing on high volume, a good sign. For chartists, volume is like a polygraph test, it lets you know whether or not a move is telling the truth.
Boeing is the best performer in the defense and aerospace group at the moment -- and now that President Trump is pulling out of the Iran nuclear deal, sooner or later, the aerospace and defense sector should bounce. Lang thinks Boeing will get the most attention because it's been the best performer in the group.
Boeing sits at $337; if the stock can break out above $345, up a little more than 2% from here, then Lang thinks it could head straight back to its old highs of $370 and beyond.
Finally, Cramer and Lang looked at the daily chart of United Technologies, the conglomerate with big exposure to climate controls, elevators and aerospace. The company reported a much better than expected quarter and the stock has nevertheless gotten hit. Again, the main reason is China.
Lang calls United Technologies the baby that got thrown out with the industrial bathwater. When the stock broke down last week, it did fall below its 200-day moving average, and from Lang's perspective that's a meaningful negative. However, institutional buyers stepped in at around $117 to $120. Lang thinks that's the floor, which is good because the stock's currently up about a buck from those levels.
The relative strength index or RSI, an important momentum indicator, bottomed last week and started turning higher. Lang thinks that was a good sign for United Technologies. He believes that this stock could be a real winner if it just busts through its ceiling of resistance at $126, where it peaked last month. That's also where the 50-day moving average is sitting at the moment. As long as United Tech is in the low $120s, Lang is staying on the sidelines, but he would get very bullish on a breakout above $126.
Cramer and the AAP team are using market weakness to add to their WestRock Co. (WRK - Get Report) position. Find out what they're telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts PLUS.
Over on Real Money, Cramer says General Electric (GE - Get Report) is still in trouble, but there are signs it may be putting in a floor. Get more of his insights with a free trial subscription to Real Money.
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
To read a full recap of this episode of "Mad Money," click here.
To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.
To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.