Let’s go “On the Charts” to look at my bearish Mad Money call on United Rentals (URI) (February 02, 2015)
Lets look at United Rentals ( NYSE:URI ); here’s why. I had an exchange with Jim Cramer last week and into the weekend, not about who’s going to win the Super Bowl, by the way the better team won. He was asking me basically what I thought about the market, what I liked, and essentially what I didn’t like; because I’m a little bit cautious on the market. Through various dialogues I said I think United Rentals ( NYSE:URI ) goes lower.
Now Cramer will have already covered this in “Mad Money Off the Charts” by the time you’re watching this video. We bumped it up from Tuesday to Monday because I said I was ready to roll. Let me explain to you my reasoning because I’m Dan Fitzpatrick and not Jim Cramer so I have a little bit of a different explanation on it.
We’ll just start at the beginning here; the S&P ( INDEXSP:.INX ), hope springs eternal, every time this thing comes down and tests 2,000.00, look, boom! It moved up. Boom! There it moved up. Insert your boom now, and then again, Boom! It’s getting ready to move up. I’m looking at this and I can see kind of a diamond pattern here. You can find whatever you want to in a chart, you really can, but various things that you find actually do matter.
I’m looking at this and I see a big potential for a more meaningful sell off, which by the way, should ultimately be bought, but we’re kind of due for another little pullback like this. With this pattern I see the potential for a move lower. Therefore I don’t really think it’s a great time to be buying stuff. There are always things to buy that are trending, they’re always giving you opportunities to get in, but that list is getting fewer and fewer; they’re still there and members you better watch the Strategy Session tonight because I’ll share some of them with you.
I have a real cautious outlook on the market, I was looking at the various ETF”s and one of them that was not doing too bad relative to the others is the XLI, that’s the Industrial ETF ( NYSEARCA:XLI ). But you’ll see if, you know anything about the ADX Indicator, I taught a webinar on this the first or second week in January, on how to use the ADX, it’s a directional indicator. It’s starting to flash some real “Danger Will Robinson” signals here, so I thought, “I’ll go through the various components in this sector. One of the sub sectors in the industrial space are these rental and leasing agencies, they include auto dealerships too.
So as I was looking through them, one of the stocks that I actually liked for quite a while, I was long the stock for quite a while, I forget exactly when I sold it, no I didn’t sell it right there, but I really liked the stock and then ultimately I got rid of it. Well you can see where this volatility has become really, really high, as opposed to generally speaking kind of a nice little uptrend.
Look at difference here, a basing pattern here for essentially 2013, a big sell off like a lot of other things, and then a nice move higher. But if we go back to the weekly chart you can see here, from the 2011 low to the high, we get about an 800 handle. In three years this stock has rallied 800 percent, if we’re counting to here. The reason I’m saying that is this, this is no secret to investors; if you’re first learning about this stock I don’t know what to tell you. This move is no secret to investors, United Rentals ( NYSE:URI ) has been on a lot of peoples watch list and own list and this and that and the other thing. So after an 800 percent move the numbers are still good.
Oh I think they have, they’ve got really strong revenue, they’re PEG ratio, P/E divided by growth rate, is very favorable, they’re supposed to still be growing, etcetera, etcetera. Okay that’s great!
I love the company, but I think the stock is not where you want to be. Look at this chart; this looks like water pouring out of a garden hose, coming down. This is the weekly chart, clearly; now I sound like a really bad attorney arguing to a judge. By the way any good attorney knows that if they’re in court the last thing they should be saying clearly, unless that’s the last name of their client, because nothing is never clear, otherwise you’re not talking about it in court.
With that said, clearly the trend has been broken; the 40-week or 200-day moving average, bounce, bounce, opps, no bounce there. We’re getting a lot of negative divergences here in MACD on the weekly chart. Heavy, heavy volume here all to the downside, so I don’t like this. If you’re an institution, you know a value guy, and you’ve held the stock, you’re a mutual fund, or whatever; at some point don’t you think that it’s time to sell or at least say I don’t want to buy any more?
So I think buying pressure on this company is, in my view this is obvious, the buying pressure has obviously gone away. I look at this and I cannot make a bullish argument for this stock, sorry. If it gets down to 60.00 or so, maybe, because that’s here; but typically when you’re in 2015 a breakout in late 2013 isn’t particularly relevant to the future support merits of this level, in other words $60.00. So I’m looking at United Rentals ( NYSE:URI ) and everything that I see tells me that we’ve got a lot of resistance here, I mean there’s a lot of resistance.
I think if the stock happens to bounce up, $90.00 great, 95.00, $100.00 this is a gift. Short the snot out of this stock, make sure you keep a buy stop someplace because I don’t want to be getting the emails either from brokenhearted broken traders or ticked off people telling me that the stock is at $200.00 and they went broke. So you’ve got to have a risk management methodology in any trade that you have. But I will say this, if the stock rallies and it looks like it could for a few days, wait for the stock to give you signs of rolling over.
Don’t just be a knuckehead and stand there in front of the stock and say, “Well I’m going to short it now because I’m sure that it’s going to roll over soon because hey, Dan said so.” No, you wait for the stock to show you where it’s rolling over, you short the stock, and you put your buy stop in right about there, I’m just putting this here relative to this line, not relative to this red box, and then that’s your trade.
I hope that helps and you may want to go to the CNBC website and check out Cramer’s version of this stock because I’m pretty sure, I know he likes the company, so I’m pretty sure that in that CNBC segment he’s going to give you his bullish thesis for the company, it’s probably going to be a pretty interesting deal. Oh by the way, double top.
Free Chart