Jim Cramer knows the stock market is forward looking and thinks investors should be looking towards the 3rd and 4th quarter of 2009 instead of at today's headlines. On his Mad Money show, on Friday, June 26th 2009, Cramer outlined some of his predictions for the second half of 2009. He is rather bullish on the market, noting that foreclosures should peak, and the housing market should finally bottom.
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Out of the stocks he made recommendations on, he only gave one a price target. He predicted Paccar, stock symbol PCAR, which is currently trading for $31.54 will reach $40 in a month.
He said manufacturing is near an all time low, which is why trucking stocks such as PCAR have been beaten down by the street. Considering they hold $4.65 in cash, have paid out $3.5 billion in dividends over the past 10 years, he thinks this stock is ready to take off. A 30% gain in a month is something to look into as the reward most definitely outweighs the risk.
Using technical analysis, it is easier to see how this scenario might play out. PCAR is currently trading in a descending triangle pattern on a daily chart. Basically, if it breaks above $33.50 it will break out of the triangle and move towards $40 per share. It has strong support at the base of the triangle at $30 per share, if it breaks below this it could go back to $25 per share.
The best way to trade this, would be to buy if it breaks $33.50 and put a stop loss just below $30 per share. A trader would risk losing about 10%, but the potential reward is a 20% gain if the stock moves to $40.
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