Cramer: Avoid Apple, embrace IBM say charts

Where Apple and IBM may be headed
Where Apple and IBM may be headed   

(Click for video linked to a searchable transcript of this Mad Money segment)

If you're looking to establish a new position, you might want to hold off on Apple.

Although Jim Cramer is a fundamental investor and believes nothing matters more than strong earnings, quality leadership, industry outlook and other fundamental metrics, he often considers other influences, including technical analysis, as he puts money to work.

"I have a lot of respect for what the charts can tell us when they're read by a skilled technician. Sometimes the forecasts of these professional chart-watchers are so accurate that it's staggering," Cramer said.

And Cramer believes few analysts are more accurate than top Fibonacci analyst Carolyn Boroden.

After looking at patterns in the charts of Apple and IBM, Boroden suggests it might be time to get more cautious on Apple after its big run, and more bullish on IBM after its recent pullback.

Here are the specifics.

IBM Apple
Rita Qyian | AFP (L) | Craig Warga | Bloomberg (R) | Getty Images

Apple

As a Fibonacci analyst, Boroden follows a set of ratios believed to repeat themselves over and over again in nature. Although Leonardo Fibonacci first studied these relationships around 1200 AD, more recently, stock traders have found these ratios also show up, regularly, in stock charts. And when they manifest, they typically suggest a stock has arrived at a point of inflection.

What exactly happened with Apple?

When Apple broke out above $597 on Friday, Boroden says the stock completed a 127.2 percent retracement of its previous December-to-January decline. That 127.2 percent is the key.

For Boroden, as well as other Fibonacci analysts, a retracement to this 127.2 percent key level is often viewed as a level at which a trend will terminate.

Confused?

In other words, now that Apple has crossed this 127.2 percent extension, Boroden thinks the trajectory will turn, in this case from positive to negative, and therefore it might be wise to take profits on at least some of your position.

IBM

As with Apple, Boroden's analysis suggests IBM is nearing a point of inflection. But this time the turn should be higher.

Looking at the charts, she says, the stock is sitting right above a very thick floor of resistance made up of crucial Fibonacci levels, a floor that runs from $180 up through $185. Also, Boroden adds, IBM could be reaching what she calls a confluence of Fibonacci timing cycles sometime between today and Friday.

Because these Fibonacci ratios are used to identify where a stock will change course, Boroden's work suggests, in this case, IBM could stop declining and start rallying sometime this week. Therefore, she thinks, IBM is a buy.

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Cramer thinks the analysis warrants attention. "Again, you know I don't think the charts hold all the answers, and I'm a fan of both stocks here, but Boroden's work is definitely something that I will keep in mind going forward."

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