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Cramer: Troubled stock about to break out?

For quite some time, this stock has been an ugly duckling. But Cramer's hearing it could soon be a beautiful buy, very soon.

The stock is Freeport McMoRan, and the forecast comes from Helene Meisler, an esteemed analyst who studied with Justin Mamis, someone Cramer called "among the best technicians of all time and the man who taught me just how important the charts really are."

Although Jim Cramer is an investor who ultimately makes his decisions based on fundamentals, he also considers technical analysis, believing chart patterns provide valuable insights, too.

And Helene Meisler tells Cramer that Freeport McMoRan is a buy based on everything Mamis taught her.

First, she notes that Freeport has been stuck in a range for quite some time with $36 a key level of resistance. Although the stock has tested that level and failed in the past, recently it pierced $36.

Meisler says if Freeport can finish the week above that key level, then other technical traders will view the price action as a breakout, a classic bull sign. And, as Cramer has explained in the past, once a stock breaks out, it often attracts new buyers, simply because it broke out.

Looking ahead, if Freeport does break out, Meisler could see the stock trading as high as $40. And because a former level of resistance often becomes a new level of support, Meisler thinks $36 could become a floor, making the risk reward reasonably attractive. And if it can break above $41, then Meisler can envision even more upside.




Dieter Spannknebel | Stockbyte | Getty Images

Looking at the fundamentals, Cramer thinks the analysis makes perfect sense.

"First of all, Freeport is mainly a copper mining company and the price of copper has been roaring of late," he said. "Second Freeport is also in the oil business and with the price of crude currently at $105 here in the United States, profits could be robust.

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All told, Cramer is bullish too.

"When I saw this chart and then did the fundamental work I realized that Helene Meisler may be onto something," Cramer said. "And the analysis is a credit to everything Justin Mamis has taught her."

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Symbol
Price
 
Change
%Change
FCX
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COPPER
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OIL
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