On Thursday’s edition of Mad Money, Jim Cramer took a look at Borg Warner (BWA) a supplier of engine systems to the auto industry.  Automakers are in a precarious position right now with the Cash for Clunkers program having ended, and Cramer took the opportunity to discuss Borg Warner from both the technical and fundamental analysis standpoints.  Cramer has always favored fundamentals, so he relies on Dan Fitzpatrick to be his chartist. 

“The stock is BWA. Makes turbochargers and torque transfer systems. They make cars run more efficiently and reduce emissions.

Borg Warner’s chart really ugly. It shows the classic example of a stock breaking down. Dan Fitzpatrick, our go-to chartist on CNBC on “The Call” and my colleague at “Real Money” part of thestreet.com site I’m chairman of, he today sent this to me and said, “Jim, this one is a sell.” The breakdown for Borg Warner below its 50-day moving average. This is the moving average so the red line is the moving and this measures the short-term trajectory and this stock has broken through that 50 day.

When that happens, Fitz says you have to sell it. In the past this 50 day has been every time it’s hit that it’s bounced. Every time. But that’s the level where buyers soak up stock because they think it’s gotten too cheap. It now has become what’s known as resistant. He doesn’t think it can get through it. This is where sellers flood the market because they think it’s become so expensive. This is a technical analysis but I know you love it so I’m giving it to you. Fitzpatrick thinks the Borg Warner breakdown is about the end of the government’s auto infused bubble caused by the cash for clunkers program. It’s over and now that the stock’s benefited, all the stocks that have benefited from it, that’s the technical picture.

What about the fundamental? I think the stock is clearly over-inflated by cash for clunkers, it had to break down. It moved up too far too fast. That doesn’t mean the business was over-inflated or its stocks will suffer. It’s just the stock is suffering not the company. Borg Warner is a strong company. It has a great balance sheet. The most recent quarter, the street was looking for a gain, the miss was rational. Lower sales of diesel cars were both temporary problems. The European clunkers program encouraged people to switch from diesel to gasoline cars.

I think the auto industry is coming back. I like the Ford Motor preferred. I also think the whole group has gotten ahead of itself because of the excitement for the program. And Borg Warner at 30 is still pricing in perfection.