ConocoPhillips is a buy according to both technical and fundamental stock analysis, Cramer told viewers Tuesday, though he likes the fundamentals case better.

It’s not just because he’s a classic fundamentals-based investor. Cramer has always focused on a company, its business and the economic environment when deciding if a stock is buy worthy. So it’s no surprise he’d lend more weight to this school of investing. But he’s got plenty of respect for technical analysis, too, especially since this approach seems to be driving the market right now. He just thinks technicians are willing to give up on COP

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[COP  Loading...      ()   ] too easily when there are so many bullish reasons to like the stock.

Technicians study charts showing past action to predict future performance. These charts say Conoco’s a buy at present levels – $51 – but below $48 the trade’s done and gone. Cramer, however, disagrees. The fundamentals show, he said, that COP is even more of a buy if it drops that low.

Here’s why: Conoco sold off hard in October, dropping to $45 from $65, on high volume, which means every investor who wanted out got out. The stock dipped again in mid-November, though this time on light volume. That’s a bullish sign overall because it means there was less selling activity. Since that November low of $41 and change, COP has had an “average cost basis” that rewards buyers and penalizes sellers. Put plainly, the pullbacks have been less severe and the rallies have been more or less predictable – good for shareholders, bad for those who dump the stock. According to technicians, Conoco’s sideways trading activity has generated enough confidence among buyers, or in technical parlance COP has “a good base,” to make the stock attractive.

The problem as Cramer sees it, though, is that smaller rallies in Conoco and larger pullbacks, at least according to technical analysis, indicate the market’s waning confidence in COP. And if sellers pushed shares lower than $48, the common wisdom among chartists would call for cashing out and moving on. But a stock that makes sense at $51, Cramer said, makes even more sense when it’s $3 lower. Especially in Conoco’s case, as the dividend yield grows the further the price drops. So why follow technicians who might be buying high and selling low when you can own a strong company for the longer term?

ConocoPhillips, the third-largest integrated oil company in the U.S. and the largest natural gas producer, may be down $44 from the stock’s $95 high, but Cramer thinks the bad news from plummeting oil and gas prices is already baked in. With a slew of production projects in China, the Canadian oil sands, QatarGas3 and Indonesia slated for 2009, there’s good reason to trust in Conoco’s recovery. Also keep in mind that this is the second-largest U.S. refiner, a business that benefits from the reduced cost of crude. So while one business may be losing money, it’s at least in part being made up in another.

Conoco, known for its stock buybacks and dividend increases, is shareholder friendly as well. The stock yields 3.6% at $51.22, Tuesday’s closing price. Even though that’s a 30% discount to the other major oils, Cramer still recommended that investors wait for COP to drop to $47, where the yield jumps to an even 4%.

The share price could go as low as the mid-$40s, Cramer said, especially if Friday’s interim quarter update is as ugly as Chevron’s was last week. So wait until after that report to buy in. Cramer thinks COP will make a good fundamentals-based investment even if oil drops to his predicted low of $30 a barrel.

Join Cramer live in the studio for Mad Money: The State of Cramerica, a special town hall-style show on Wednesday, Jan. 21. Get your free tickets here!










Jim’s charitable trust owns ConocoPhillips.

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