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Cramer: Yikes! Scariest pattern in the chart book

While Jim Cramer believes in the power of fundamentals when evaluating stocks, he also wants to emphasize the importance of technical analysis. Although sometimes the patterns of chart can look silly mimicking letters, geometric shapes or even body parts, there is no denying that they are valuable.

The most simple and reliable pattern out there is the dreaded head-and-shoulders pattern. Cramer learned not to ignore this pattern when his charitable trust bought Alcoa in the low teens in 2010, and ultimately took a blood bath because it was a really early buy.

Alcoa's stock had a healthy run from winter of 2010 until February of 2011, rising to $17 from $13. The stock ran to $18 on the eve of its quarterly earnings report, and Cramer thought it was a fine quarter when it reported.

Yet what worried him was that even after an...