Charts signaling definitive bottom in this industrial metal?

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Cramer is a fundamental investor. However he's always intrigued by the charts, especially when they signal something as radical as this.

According to insights from Tim Collins, a top chart analyst and Cramer colleague at RealMoney.com, steel may be making a definitive bottom.

Looking at the daily chart of the Market Vectors Steel ETF, the SLX, Collins has identified a potentially bullish pattern. (This ETF contains Rio Tinto, ArcelorMittal, Nucor, Reliance Steel and other global companies.)

Collins says the Steel ETF has experienced a short-term bounce since late June, and this bounce has accelerated over the last four days with the SLX breaking out from an ascending triangle pattern.

Although the SLX may encounter resistance at $44, Collins says if it can pierce that level, the chart will make an inverse head and shoulders pattern – an extremely bullish development.

Should that happen, he can see the SLX printing $51.

Looking at the weekly charts of the SLX Collins believes other patterns confirm the conclusion.

He says the SLX has already broken out above a first crucial ceiling of resistance. The next key level, he says, is $46. If the SLX can break above $46, he could see the steel ETF rallying to $58 over the next six to twelve months.

Tetra Images | Getty Images

Collins also sees other constructive developments. He says the commodity channel index or CCI is flashing an overbought reading, which he says can be viewed as the start of a new trend or the beginning of an extreme move.

Also, he said the TRIX (Triple Exponential Average ) and the MACD (Moving Average Convergence Divergence ) have recently shown bullish crossovers, the kind that tell chartists like Collins that the steel ETF is ready to roar

Although Collins finds developments bullish he's finds the risk /reward in a single steel stock to be more attractive.

And that stock is Steel Dynamics.

Looking at chart patterns, Collins thinks that if Steel Dynamics can finish the week over $16, then he believes the stock will march up to $18 and potentially $20 by year end.

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Jim Cramer thinks the analysis presents serious food for thought. Calling a bottom in steel is a somewhat radical view, he said, however that doesn't mean it's not right.

As a fundamental investor, Cramer views steel as a proxy for China. Therefore he says, if you believe China's economy is starting to percolate, then steel stocks, may in fact, have made a definitive bottom. "They certainly have been hammered mercilessly for over a year," he said. The path of least resistance could be higher. However, Cramer's preferred play is Timken.

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