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Charts Flashing ‘Buy’ Signal

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

Although conventional wisdom would suggest the path of least resistance for a consumer staples stocks such as Kellogg is lower, chart patterns seems to say something quite different.

Largely consumer staples stocks took a hit after bond yields spiked with these dividend yielders falling out of favor. Kellogg, however, may be an exception to that rule.

According to Tim Collins, a technician and Cramer colleague at TheStreet.com, chart patterns appear to be extremely bullish.

Specifically, Collins research shows a key crossover happening in the moving averages. That is Kellogg's 13-day moving average, a very short-term measure of the stock's trajectory, has just crossed above its 34-day moving average, which is a medium-term measure of that trajectory.

When the shorter-term 13-day moving average goes above the longer-term 34-day one, historically that's a buy signal.

Also, Collins is optimistic for other reasons.

Kyu Oh | E+ | Getty Images

He says that for the last few months, Kellogg has been caught in a descending triangle pattern, with a floor of support at $61.50 and a ceiling of resistance at $65. On Tuesday, however, Kellogg broke out above that $65 resistance level.

Collins sees only one more ceiling left between the stock and clear skies, and that's the 52-week high of $66.38. In other words, Collins thinks Kellogg is starting to break out, a very bullish development.

Based on patterns in the daily chart, Collins can see Kellogg going to $70.50 over the next four to six weeks and looking at patterns in the weekly chart, he thinks Kellogg could print $77 by the end of the year.

And it's not just Kellogg. Collins is seeing some very similar patterns in another consumer staples stock; J. M. Smucker.

Again Collins believes the shorter 13 day moving average is trying to cross above the 34 day moving average.

Should that bullish crossover happen, Collins thinks it may generate enough momentum to propel Smucker past the stock's ceiling of resistance at $105. If that happens, then Collins believes Smucker will trade up to $110.

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Whenever technicals suggest a buy, Cramer always looks at fundamentals to either confirm or deny the analysis.

"Based on Tim Collins' interpretation of the charts, both Kellogg and Smucker could be ready to roar here," Cramer mused. "That's a very controversial view because the market would be downright shocked if that happened. (That is, the prevailing belief on Wall Street is that dividend yielding stocks have fallen out of favor because of the recent spike in rates.) Me? I wouldn't be too surprised if Collins turns out to be right."

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