Jim Cramer has always considered teen retailers to be the most puzzling, confusing and downright frustrating segment of retail.
Hence, he was very suspicious when this group that has been down in the dumps for ages suddenly bounced back after the election of Donald Trump.
"Historically, I have not liked the teen apparel plays. I think teenagers are incredibly fickle customers, and even worse, it's almost a truism that adults don't understand teens, even the adults who run these teen oriented apparel companies or the adults who analyze their stocks," the "Mad Money" host said.
When an investor buys shares in a teen retailer, it's a bet on what teenagers like, and that is something that can change on a dime.
To gain further insight to the group, Cramer spoke with technician Bob Lang, the founder of ExplosiveOptions.net and colleague at RealMoney.com. Lang said teen stocks like Zumiez, Tilly's, Francesca's and Five Below have been making some fantastic moves lately.
He even managed to enroll Cramer in believing in Five Below based on the fundamentals.
Zumiez is the skateboard and snowboard oriented apparel play that has been rallying higher for the past seven months. The stock now tests its ceiling of resistance at its 200-day moving average for the first time in a long time. And while Cramer thinks the stock is too risky, Lang said the chart is very strong and saw signs that institutional money managers are loading up on the stock.
Tilly's is another teen retailer that surged higher after reporting a better than expected quarter. In Lang's perspective, Tilly's has suddenly become very popular on Wall Street and has rallied hard in the past two weeks. He also detected incredibly strong volume, which suggested money managers are scrambling to own it. However, Cramer was wary that the stock has moved too far, too fast, and warned investors not to chase it.
The next teen retailer was Francesca's, which sells apparel, jewelry and accessories for young women. The stock spiked 28 percent recently in a single session on the back of a better-than-expected quarter. Lang thinks the chart is powerful, with very strong volume, and wouldn't be surprised to see if the stock can go toward $30 in the next several months.
The one teen retailer that caught Cramer's attention was Five Below. Five Below wasn't Lang's favorite chart in the group, but he thinks it has good potential. Lang said if the stock can break out above its ceiling of resistance at $44 it could have more upside, but if it breaks down below the floor of support at $41, that could be bad news.
"I think Five Below is an excellent regional and national growth story with a terrific business model. In my opinion, this is less about gaming what teens want and more about the fact that people love bargains," Cramer said.
While many teen retailers have skyrocketed lately, Cramer still remained cautious of the stocks. Though the charts suggested Zumiez, Tilly's and Francesca's could have more room to run and Five Below could have more potential if things go right.