Cramer: Charts predicted Komatsu's bid for Joy Global

Cramer: Charts predicted Komatsu's bid for Joy Global

For several weeks, Jim Cramer has been baffled by the mysterious moves reflected in the charts for Joy Global.

"I thought the chart was lying," the "Mad Money" host said.

It turns out the charts were right all along, Komatsu Ltd. agreed to acquire Joy at $28.30 per share, a purchase price that is a 20 percent premium to Joy's closing price on Wednesday.

Joy Global is the 129-year-old company that makes and services mining equipment, predominantly used for coal. The coal mining business has been fading for years. With only a handful of public traded companies related to coal, the biggest ones have filed for bankruptcy.

"Musk manifesto or not, we know there aren't going to be any new coal plants built in this business, and that the sustainable sources of energy that the man behind Tesla pushes relentlessly are the future," Cramer said.

The Japanese bidder wouldn't make this offer if it felt China was about to falter again industrially.
Jim Cramer
Joy Global operations
Source: Joy Global

So, with no reason to buy Joy Global, Cramer dismissed the big moves of the stock week after week. He finally realized what was pushing the moves on the charts when the takeover bid surfaced from Komatsu.

Bacyrus International is Komatsu's arch-rival that was purchased by Caterpillar for $7.6 billion in 2011. Investors that loved Bacyrus also loved Joy, which Cramer thinks had a much better after-market business.

However, as coal collapsed, so did the stock of Joy Global. At the time of the Bacyrus bid, the stock traded at $77, and it fell as low as $9 in January 2016.

"Komatsu's bid is also a very welcome sign for the industrials to sell into China," Cramer said, "The Japanese bidder wouldn't make this offer if it felt China was about to falter again industrially."

Cramer also attributed the strength in the stocks of Caterpillar and Cummins to the bid of Komatsu for Joy.

More importantly, now the mystery is solved for Cramer. The movement in the charts for Joy wasn't just errant buying. It was accumulation.

"The charts don't lie so much after all," he said.

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