In this Free Chart video we’re going back to where we did on the last one, L Brands ( NYSE:LB ). If you recall last time I mentioned that this had a heck of a move off of the top, 10 percent, in just a few days. That, and then we’re looking a resistance here I guess, 20-day moving average, so maybe it’s time to ditch this thing. But the weekly chart shows a different situation here. And that is that this stock got so oversold that this could, just as a technical bounce, this could go up certainly above 70.00, maybe even to 75.00, where it would essentially retest this last big low. So if we go back to the daily chart you can see what I’m talking about here. This is really a gap here and so I would expect L Brands ( NYSE:LB ) to even come back to 73.00ish, something like that, to test the bottom of this gap. It’s that oversold.
Yes, I know retail stinks and this chart has really been stinking up the joint for quite a while, but then it’s since turned around. Just think about it this way, with this is kind of big selling volume here, this is a selling climax. Everybody has dumped to the stock that wanted to dump the stock. So now you’ve got really a pretty significant majority of folks who are short-term traders that are in this stock, that are winning, that are making money, which means that resistance is not going to be that great as this moves forward. I still think this is a buy. Do I think you’re late? Yes, absolutely. But just because you’re late to a party doesn’t mean that the party doesn’t continue for a while. Hey, grab a beer, enjoy the music, don’t do anything stupid, and enjoy the party.
Monsanto ( NYSE:MON ). The reason I’m covering this is, remember they got an offer, it was an unsolicited bid from Bayer ( ETR:BAYN ) for $122.00 a share, and they turned it down. So then my suggestion was, the stock gaps up here and then it trades down, that tells you that (this was before they turned it down) the market is not believing that this stock is going to trade for $122.00 a share, so you don’t want to be long. Then the very next day, Boom! You have to look and say, “Well now the market is telling me something different. Now this is moving higher so I want to be a buyer.” You don’t want to be shorting this stock, not when it moves higher above the prior day. And now we have this though, you can call that a shooting star I guess, more than a bad company song, or a spinning top I guess.
The bottom line is, this is, in my view, almost kind of like a climax top. Now this is totally headline sensitive. Tomorrow maybe somebody is going to come in for an offer for 125.00 or 130.00. So you always have to be careful of that. But after this stock, it’s like gap, watch, big gap here, and then another gap here, then another gap here, then another gap here. These are like these breakaway gaps that are occurring above this congestion. So it’s like one breakaway gap after another and then we get this kind of reversal. Decent volume, not huge, but this looks to me like the buying activity has kind of petered out. All of the aggressive buyers have kind of done their business and now the stock is rolling over.
So here’s the thing, I wouldn’t short this stock, again, just because of the headline risk; you can get another offer coming in. But if you’re long the stock I would be SERIOUSLY having a tight stop on this. Intraday, this was a higher high, a higher low and now we’ve got a lower high and a lower low intraday. This is a reversal pattern to me. I couldn’t tell whether this is going to go all the way down, but I’m just talking about as a trade. If you were long this stock you need to take that money off the table. You can always buy it back, but this will turn out to have been a pretty good trade on the acquisition that never was or that at least hasn’t been so far.
Every night we watch the same shows, Fast Money and Mad Money, and we want to USE those ideas the grow OUR money. Well good trading takes more than just pushing the buy button, every morning, to get the stocks you saw on TV last night. I’m here to help you make money on these 3 stocks I saw on TV.
We’re going to start with Ulta ( NASDAQ:ULTA ) here. LOVE this company, love the stock. They reported earnings and wow! where’s the stock trading at? This stock was up, at one point, about $20.00 or so after hours. They were talking about this on Fast Money and the consensus was, you’ve got to sell into this. I have no problem with that. If a stock is up as much as this is, it will probably be up 10 percent tomorrow morning, it pays to sell into that, because it’s just such a quick profit. In the past though, look what’s happened with this stock: A year ago the stock gapped up and since that opening gap it’s up another 40 percent or so. But it also gapped up and traded sideways forever. It comes up again, same thing, these sideways trends forever. You’ve got the big move here. Now you’ve got the big move here. Again, I like Ulta ( NASDAQ:ULTA ), but I don’t think it’s shorted enough. I don’t think there’s enough short interest that you’re going to see a squeeze tomorrow. I have no idea what’s going to happen first thing in the morning. But I will tell you this, I would be selling into that strength AS A TRADE. Longer-term though, any kind of pullback, if we get a really bad, dumpy day in the market, I would TOTALLY want to be buying this thing back. Because ultimately I think it goes higher.
Okay, lets look at other stores here. Chico’s ( NYSE:CHS ). Wow! Chico’s ( NYSE:CHS )and the man here, Chico and the man here. Not a good thing here. They reported earnings, they’re cutting costs, just brutal. I don’t get any of my stuff from Chico’s ( NYSE:CHS ). Apparently neither does anybody else. The stock was down a lot bigger during the day. It only closed down less than 3 percent after some really nasty numbers. Here’s my deal, this is not a trade for me. If the stock falls back to 9.60 or so it could probably go even lower. But if you are kind of a nimble trader here’s really the analysis: You’ve got ultimate support right there. The stock opened there, closed up there. So you want to see this stock continue to trade higher. If it starts trading back into this range maybe you would ultimately make money on it, because again, this is a higher low. But the stock is under pressure. Retail is under pressure. Do you really want to go to Chico’s ( NYSE:CHS )?
Instead go to Abercrombie & Fitch ( NYSE:ANF ). I don’t think so. Look, Ulta ( NASDAQ:ULTA ) is still the place to go. Abercrombie & Fitch ( NYSE:ANF ), also some pretty brutal earnings; they’re quarterly reports were horrible. This is a stock, it traded down, kept going. It’s still under distribution. You would probably get a short-term oversold bounce tomorrow. But don’t you think, after this kind of move and after the dismal quarter that they had, that any big funds, any big money managers who happen to still be owning this pig. Talk about a marketing campaign for petefelia, I digress, I just see their marketing efforts and think, “Your stock deserves to be at zero.” Again, I digress. The bottom line is, if you’re a big money manager and you still own this stock after the kind of quarter that they reported, you’re going to want to be selling into any strength at all. And I think that’s what ultimately going to be happening here. So just get out. Stay out and move on. And hey, look to buy Ulta ( NASDAQ:ULTA ) on any kind of a pullback.