One of Cramer’s high-growth C.A.N.D.I.E.S. stocks has left a sour taste in the Mad Money host’s mouth.
The C.A.N.D.I.E.S., comprising Chipotle , Apple , Netflix , Deckers Outdoor , Intuitive Surgical , Express Scripts and Salesforce.com , are up an average of 5% compared to the S&P 500’s 2% loss since Cramer first created the group on June 3. But the shoe company Deckers, maker of UGG boots, Tone-ups and other popular products, has not taken part in that move. No, it instead is down 9% in that time.
The charts seem to explain the poor performance—or do they?
According to Ken Shreve, one of Cramer’s favorite technical analysts, Deckers’ daily chart holds a number of bearish signs for the stock. A series of lower highs indicates that sellers are overpowering buyers whenever the stock rallies. There’s also been regular selling at the 50-day moving average, which measures DECK’s short-term trajectory, turning that key line from the stock’s floor to its ceiling.
Also, the selling pressure overall has been increasing on higher volume, another bad sign for Deckers. And Shreve said the stock needs to break through $51, or its upper channel line, which is a line connecting all of its recent highs, in order for technical analysts to consider it upward bound rather than headed lower. That’s 9% higher than DECK’s present level. And even then lots of sellers would be use the gain to take profits on the stock and cash out.
The takeaway, at least to chartists like Shreve, is that the run in Deckers looks to be over. Like done. Not resting before another move up, but finished.
Of course, Cramer can’t understand how a stock at $51 is more attractive than one at $47. Especially when the long-term thesis that attracted him to Deckers in the first place—a bull market in shoes—is still in tact.
Cramer recognized that there was definitely some institutional selling of DECK taking place, but that’s because the Street sees the company’s products, specifically UGGs, as a fad. What they don’t see, though, is the growth overseas (30% of sales by 2012), the profitable switch to retailing from wholesaling (same-store sales up 19% last quarter), and the success Deckers has in the coming holiday and winter seasons. And the stock is incredibly cheap right now, too, trading at about 12 times 2011 earnings with a 24% long-term growth rate.
“I’m betting it snaps back,” Cramer said of the ailing Deckers, “and, if I were you, I would be buying it aggressively.”
When this story published, Cramer's charitable trust owned Apple.
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