3 STOCKS I SAW ON TV: FIT, VRX, UTX, HON(February 22, 2016)
FIT VRX UTX HON UTX
If you’re a hardcore trader like me you’ve got CNBC on the first thing in the morning. It can get really confusing just because of the plethora of information. You’ve got Squawk Box, Opening Bell, Power Lunch, Closing Bell, Fast Money, Mad Money. And guess what? There are stocks mentioned in all of them. Here’s what I’m going to do: I’m going to take 3 stocks that I saw on TV, I’m going to cut through all the chatter, shall we say, and lets get right to what we all want to do, which is make some money.
Today I’m going to start with Fitbit ( NYSE:FIT ) here. The company beat earnings, great! But they had really crappy guidance, so that’s why the stock is down here. Here’s the deal: You’ve got to watch THIS level; I’m not a real Fitbit ( NYSE:FIT ) fan, basically just because the stock’s doing what it’s doing. Meaning it’s too low to short and to low to go long too. But here we basically had a climax sell-off at about $12.90, heavy, heavy volume. So now we get this kind of move up here on big volume, right? Everybody wants to get positioned before the company takes a dump. So now we’re back down here. You’ve got to look at this $12.90 level as “the line in the sand”, because the stock has gapped down after hours but it isn’t trading below this level, It’s a little bit dicey to trade first thing in the morning.
But here’s my take: If a stock is down or up, whatever it is, if it’s like 5 percent off of a trade off of a closing price I’m not really going to chase it. But if it’s 14 percent, like this one is, one way or the other, I’m going to look for evidence that it’s right to fade it. In other words it’s down, I want to buy it. It’s up, I want to sell it just because it’s gapping so much. So what I would suggest is, watch how this stock trades first thing in the morning. If it stays above the opening print then go ahead and take some stock and you’ll probably get a bit of a rebound. Because if this is all the stock is gapping down after lousy guidance, then I’d say the fix is pretty much in here. Let’s just say that will be the low for the stock.
Okay, Valeant Pharmaceuticals ( NYSE:VRX ). You know, traders, investors, they don’t like it when a company reports lousy earnings. They don’t like it when a company gives lousy guidance. But when a company says that they’re going to have to restate some of their earnings, investors REALLY don’t like that. That’s what’s happening here. Look, there have been, I think, a LOT of folks, a lot of money managers who have gotten clipped on this, besides Bill Ackman. But now this stock is down, I wouldn’t trust this, “Like oh I’m going to buy this, it’s support.” I don’t think that the company rallied here off of a similar announcement that they’re going to be restating earnings. My point is: The stock was down here again and it was NOT baked in that the company’s going to be restating earnings. This stock is $76.00 above ultimate support. It’s obviously not going to get down that low, but I’m telling you, this is not a stock that you want to be buying into. I would stand aside on this one. And then frankly, sometime over the next week or two, if you get a rally, I would fade that thing, I would short it. But right now, just stay away.
Okay, United Technologies ( NYSE:UTX ). Big news today, Cramer was talking about this on Mad Money. United Tech ( NYSE:UTX ), he confirmed, or it was confirmed, Cramer didn’t confirm it, but he mentioned it, that Honeywell ( NYSE:HON ) is in talks to buy United Technologies ( NYSE:UTX ). This is the thing about these companies, they’re generally not going to look to buy other companies when they are at 52-week highs. But United Technologies ( NYSE:UTX ) has really been in the dumps for a while. I used to really like this company when the stock was doing better. Now I don’t like it at all, but Honeywell ( NYSE:HON ) does. So here’s the thing: Cramer says that even if they do try to move forward on the deal, there could be antitrust concerns and that could be a problem. I will tell you this, who knows how this will work out? But whoever is in the Justice Department, that has a lot to do with this. The current Justice Department is not exactly business friendly. That’s probably the understatement of a lifetime. And so I think there would be better chance of this thing not getting confirmed, or not getting the okay from the government, in this administration.
What I mean is, who knows how long that review is going to take, if indeed they do make an offer? I would say this, trade the darn technicals and forget about this other stuff, it’s just the kind of stuff they talk about on TV. This stock has moved up a lot on big volume. It will be subject to the news though, you look at Honeywell ( NYSE:HON ), this also traded big. Big upward move and then down. Why is that? It’s the same deal, it’s all Honeywell ( NYSE:HON ), United Tech ( NYSE:UTX ) news. So if this stock starts trading lower, I would say back below the 50-day moving average, my bet is, that deal is NOT going to get done. As long as it stays above this level, I think you can go ahead and buy United Tech ( NYSE:UTX ) before Honeywell ( NYSE:HON ) does. And by the way, if they are “in talks” at some point soon they’re going to come out with a NUMBER that they’re going to say, “This is our purchase price.” Because the last thing that these acquiring companies want to do is just let a stock run on up on anticipation that a deal is going to be made. Because if they’re not careful the market value of the stock is going to run WAY higher than the price that they were willing to pay. So I would look for some kind of announcement on this pretty soon.
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