How to Trade 6 Dow Components on Jim Cramer’s 'Anointed' List of Stocks

Editors' Pick: Originally published Jan. 28.

Jim Cramer's list of "38 Anointed Stocks for 2016" includes six components of the Dow Jones Industrial Average (DIA) . And here's a technical approach to how to trade them.

General Electric (GE) is an old-line industrial giant the strayed into financial services, but began shedding those assets in 2015. Weakness at the close of 2014 made the stock one of the "Dogs of the Dow" for 2015. The stock was the fourth-best performer of the Dow 30 in 2015, with a gain of 23.3%. GE had a modest negative reaction to earnings on Jan. 22.

Home Depot (HD) , the home improvement retailer, is a major player in the big-box retailing space. This stock has been on a strong momentum run-up since confirming a "golden cross" back on Dec. 5, 2011, when the stock closed at $40.23. (A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead.) The stock was the third-best performer of the Dow 30 in 2015, with a gain of 26%. Home Depot reports quarterly results on Feb. 23.

Johnson & Johnson (JNJ) is a diversified health care company, including pharmaceuticals and related consumer goods. The stock was little changed in 2015 and outperformed the Dow 30. J&J had a positive reaction to earnings on Jan. 26.

3M (MMM) is an industrial company concentrating a diversified group of consumer and manufacturing products from Post-it Notes to security devices. The stock underperformed the Dow 30 slightly, with a loss of 8.3% vs. a 2.2% loss for the Dow 30. 3M had a positive reaction to earnings on Jan. 26.

Nike (NKE) is the premier maker and seller of athletic footwear and equipment for many sports worldwide. Nike was the best performer among the Dow 30 in 2015, with a gain of 30%. Nike had a positive reaction to earnings on Dec. 23, setting an all-time high, and has since been consolidating gains on profit taking.

Pfizer (PFE) is a major pharmaceutical company. The stock outperformed the Dow 30 with a modest gain of 3.6% in 2015. Pfizer is scheduled to report results on Feb. 3, and analysts expect earnings of 51 cents a share. 

The Dow 30 is down 8.5% year to date, and is in correction territory, 13.1% below its all-time high of 18,351.36 set on May 19. The year-to-date performance of five of six of Jim Cramer's Dow component "anointed stocks" are outperforming the Dow 30. 

Here's a scorecard for Jim Cramer's "anointed" six Dow components.

 

Now let's look at the weekly charts for each.

The weekly charts: The red line through the weekly price bars is the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average, considered the "reversion to the mean." The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicate overbought and readings below 20.00 indicate oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00.

Here's the weekly chart for General Electric.


Courtesy of MetaStock Xenith

General Electric closed Wednesday at $28.00, down 10.1% year to date. It is in correction territory, 11.1% below its multiyear high of $31.49 set on Dec. 31. The stock is just above its 200-day simple moving average of $27.61.

The weekly chart for General Electric is negative, with the stock below its key weekly moving average of $29.04. Its weekly momentum reading is projected to decline to 36.62 this week, down from 47.69 on Jan. 22. The 200-week simple moving average is a key technical support of $24.72.

Investors looking to buy General Electric should enter a good-till-canceled limit order to buy the stock if it declines to $25.74, which is a key level on technical charts until the end of March. Investors looking to reduce holdings should enter a GTC limit order to sell this stock if it rises to $33.97, which is a key level on technical charts until the end of June.

Here's the weekly chart for Home Depot.


Courtesy of MetaStock Xenith

Home Depot closed Wednesday at $121.57, down 8.1% year to date. It is in correction territory, 10.3% below its all-time high of $135.47, set on Nov. 27. The stock is just above its 200-day simple moving average of $118.90.

The weekly chart for Home Depot is negative, with the stock below its key weekly moving average of $125.09. Its weekly momentum reading is projected to decline to 46.80 this week, down from 54.45 on Jan. 22. The stock is well above its 200-week simple moving average of $85.87.

Investors looking to buy Home Depot should enter a good-till-canceled limit order to buy the stock if it declines to $115.88, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should enter a GTC limit order to sell this stock if it rises to $131.33, which is a key level on technical charts until the end of March.

Here's the weekly chart for Johnson & Johnson.


Courtesy of MetaStock Xenith

Johnson & Johnson closed Wednesday at $102.16, down just 0.6% year to date and 6.7% below its all-time high of $109.49 set on Nov. 13, 2014. The stock is just above its 200-day simple moving average of $90.10.

The weekly chart for Johnson & Johnson is neutral, with the stock above its key weekly moving average of $100.07. Its weekly momentum reading is projected to decline to 42.21 this week, down from 46.29 on Jan. 22. The stock is above its 200-week simple moving average of $90.10.

Investors looking to buy Johnson & Johnson should enter a good-till-canceled limit order to buy the stock if it declines to $94.05, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should enter a GTC limit order to sell this stock if it rises to $110.82, which is a key level on technical charts until the end of March.

Here's the weekly chart for 3M.


Courtesy of MetaStock Xenith

3M closed Wednesday at $145.55, down 3.4% year to date, and in correction territory, 14.6% below its all-time high of $170.50 set on March 2, 2015. The stock is below its 200-day simple moving average of $152.17.

The weekly chart for 3M is negative, with the stock below its key weekly moving average of $146.07. Its weekly momentum reading is projected to decline to 26.17 this week, down from 27.76 on Jan. 22. The stock is above its 200-week simple moving average of $128.52.

Investors looking to buy 3M should enter a good-till-canceled limit order to buy the stock if it declines to $139.44, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should enter a GTC limit order to sell this stock if it rises to $159.13, which is a key level on technical charts until the end of March.

Here's the weekly chart for Nike.


Courtesy of MetaStock Xenith

Nike closed Wednesday at $59.58, down 4.7% year to date, and in correction territory, 12.6% below its all-time high of $68.19 set on Dec. 23. The stock is above its 200-day simple moving average of $57.97.

The weekly chart for Nike is negative, with the stock below its key weekly moving average of $61.15. Its weekly momentum reading is projected to decline to 27.69 this week, down from 29.69 on Jan. 22. The stock is well above its 200-week simple moving average of $39.61.

Investors looking to buy Nike should enter a good-till-canceled limit order to buy the stock if it declines to $53.48, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should enter a GTC limit order to sell this stock if it rises to $61.41 and $62.69, which are key levels on technical charts until the end of June and March, respectively.

Here's the weekly chart for Pfizer.


Courtesy of MetaStock Xenith

Pfizer closed Wednesday at $30.52, down 5.5% year to date, and in correction territory, 16.3% below its all-time high of $36.46, set on July 31. The stock is below its 200-day simple moving average of $33.49.

The weekly chart for Pfizer is negative, with the stock below its key weekly moving average of $31.50. Its weekly momentum reading is projected to decline to 15.91 this week, down from 18.20 on Jan. 22, moving deeper into oversold territory. The stock is above its 200-week simple moving average of $29.57.

Investors looking to buy Pfizer should enter a good-till-canceled limit order to buy the stock if it declines to $27.60, which is a key level on technical charts until the end of 2016. Investors looking to reduce holdings should enter a GTC limit order to sell this stock if it rises to $33.11, which is a key level on technical charts until the end of March.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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