Cramer: 2 Ugly Ducklings to Become Beautiful Swans?

(Click for video linked to a searchable transcript of this Mad Money segment)

With the Dow Jones already 2000 points higher since Jan 1st and more than half of 2013 still lying ahead, pros such as Jim Cramer like to take a closer look at laggards.

"That's because when some of the leaders start to look exhausted, some of the laggards can begin to play catch-up," Cramer said.

Although there are many ways in which to identify laggards with promise, a popular method used by pros involves technical analysis.

That is, pros look for bullish chart patterns and then they examine fundamentals to either confirm or deny the thesis.

In the following analysis Jim Cramer employed insights provided by Toni Hansen, the President and co-founder of Trading From Main Street, who thinks Intuitive Surgical and Potash both exhibit chart patterns that suggest significant upside lies ahead.

Here's the analysis:

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Intuitive Surgical

Since the first half of last year, Intuitive Surgical has been trading sideways, something pros call consolidation. However, according to Hansen, the same kind of thing happened twice before and lasted for about a year and a half; then the stock again marched higher.

It looks to Hanson as if the current consolidation has been underway for a year and a half; if the pattern holds up, it's almost time for another march higher.

Also patterns suggest to Hansen that Intuitive Surgical may have a strong floor of support at its 21-day exponential moving average, a short-term measure of the stock's trajectory that's currently at $482 with a second, lower floor at $464. If Hanson is correct, downside may be somewhat limited.

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Upside, however, may be significant. Although chart patterns suggests Intuitive Surgical may be facing a ceiling of resistance at $534 and a second ceiling above that one at $561, if the stock can break above those key levels, Hansen would take it as a sign that this once ugly duckling stock is morphing into a beautiful swan.

Do fundamentals confirm the thesis?

With baby boomers heading into their golden years, Cramer can see demand for Intuitive Surgical's Da Vinci surgery robot growing sharply. However, considering the stock was trading around $470 in late May, he's only a buyer on a pullback.


Looking at patterns in the chart of Potash, Hansen has noted that the stock has retraced 50% of its rally from the generational lows of 2009 to its peak in 2011. In layman's terms, the stock has given up half of its gains.

A 50% retracement is considered significant by chart watchers and, as a result, Hansen believes Potash has a powerful floor of support at its current price level.

However, charts suggest the upside potential could be significant.

Based on the technicals, Hansen thinks that Potash could be ready to spring back—she sees it going to $56 over the next year, a 36% move without much risk from a chart perspective.

Do fundamentals confirm the thesis?

Jim Cramer views Potash as a stock whose fortunes are tethered to the health of the global economy. "Potash is the kind of stock you only want to buy if you believe the global economy could be on the verge of a turnaround," he said. "I'm not a huge fan but Hansen has been very right lately."

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