Chaikin began by looking at the daily chart of Cramer-fave Marathon Petroleum, a U.S.-based, petroleum-focused spin-off of Marathon Oil.
Shares of Marathon Petroleum were clobbered after the company’s slightly weaker than expected earnings results and news of its $23 billion acquisition of competitor Andeavor.
Still, Chaikin liked what he saw. He used three indicators: the Chaikin Money Flow tool, which tracks buying and selling pressure in a given stock; the Chaikin Relative Strength tool, which compares a stock’s performance over the past six months with the S&P 500’s; and the Chaikin Power Gauge, which uses 20 different fundamental and technical data points to build a reading that’s either very bearish (red) or very bullish (green).
For Chaikin to recommend a stock, all three indicators need to be showing bullish signs.
And “as far as Chaikin’s concerned, this is a stock that has nearly everything going for it from a technical perspective,” Cramer said.
In the stock of Marathon, all three indicators were flashing positive signs, even as the Chaikin Money Flow subsided when the selling started.
“In Chaikin’s view, Marathon is a buy into this weakness,” Cramer said. “Even with that not-so-hot quarter the company just reported, the Andeavor merger will turn Marathon into a powerhouse; the top refiner in this country. The selling here is very excessive.”