3 Stocks I Saw on TV: VRX, ORCL, CMG (March 15, 2016)
VRX ORCL CMG
Every day we watch the same shows on CNBC, Fast Money, Mad Money, and we want to use those ideas to make some money. Well good trading takes more than just pushing the buy button each morning on some of the stocks that you saw on TV yesterday. I’m here to help you make money on 3 stocks that I saw on TV.
First we’re going to look at Valeant Pharmaceuticals ( NYSE:VRX ). This thing got it’s market cap cut in half today, just absolutely brutal. It’s very, very, very oversold. The thing is, the company cut forecasts they’ve also got accounting problems, gouging problems, you name it the news is bad. There is just so much uncertainty around this stock. Now, it seems like, on a stock like this, there are two kinds of traders, some that are going to look at a stock like this and say, “Oh my gosh! I’ve got to buy this thing.” And then the others are going to look at this and say, “Oh my gosh! It’s going down, it’s going to zero, I want to short it.” Lets look at a couple different time frames to see what’s really happening here, and I’m just talking technically.
On the weekly chart this thing feels like it wants to go to zero, and for all we know it might. There’s absolutely NO way, no possible way I’d buy this falling knife. It’s not just a falling knife, it’s like somebody stood up on the roof and threw the knife down. This thing is going down really fast. I want you to be thinking about it this way: There are a lot of folks that are short this stock; kind of like me today, only I’m not going to hold this stock over night. Because at some point you’re going to have some kind of short covering rally. Maybe it’s going to be because of something the company says, who knows? But I know this, in one day a company gets half of it’s market cap cut, and I’m short this stock at 33.51. What happens if something comes out and this stock rallies up 10 points? That’s a pretty bad day for me.
So this is what I want you to do: I want you to zoom in a little bit more and look at the 30-minute chart. If you’re looking at say the 5-minute chart intraday today, it was kind of all over the place after a while. I was trading this stock, short most of the day, flat the rest of the day. But if you zoom out and you look at the 30-minute chart; yes, I see that the slope is doing this, down, down, down and then it starts to flatten out. Well that doesn’t mean that it’s going to lead to this. What you want to be doing is just watching the bars. Red or green; there’s only one green all day here. And coincidentally, it kind of took place during the middle of the day, which is when nobody is doing much of anything. Tomorrow morning, if this stock gaps up at all, if it trades up at all, I want you to watch for the red bars and that’s when you can short this stock.
By the way, if it gaps up tomorrow and you don’t see any red bars but instead it just keeps moving higher, well don’t short into that, just like you didn’t want to buy into this decline today. So I’m just telling you, go with the trend. Know that short covering rallies can be vicious. Ultimately this stock is probably going lower. But think about this, what the heck do I know about that? What does anybody know about that? The reason the stock is falling so much is not because smart money knows something that you and I don’t. It’s falling because of the uncertainty and the uncertainty around the numbers. And the only thing that matters to investors is numbers. So I want you to be careful about this one. I do think it’s still going to be a good short, but you’ve got to be seeing the intraday setups. Right now I would be afraid to hold this short over night; but that doesn’t mean I wouldn’t be afraid to short it.
Now on Oracle ( NYSE:ORCL ) we’ve got the other side of the coin here. The stock has been rallying into earnings, finally above the 200-day moving average for the last week or so. It’s the first time it’s been that way in a while. Now a lot of traders, I’m talking big guys, we don’t really care what the small guys do, will really want to own a stock if it’s above the 200-day moving average. So even before the company reported earnings, which put it up a little bit above $40.00 here after hours. Even before that, this was a stock that was kind of looking good. The company announced that they’re going to be increasing their buyback by 10 billion dollars. They beat on revenue and here’s the thing, it was interesting what some of the guys on CNBC were saying. Bob Pisani and a couple of the other old tech guys were talking about Microsoft, and noting that Oracle ( NYSE:ORCL ) hasn’t really been that great at reinventing itself. Microsoft, you know they moved from selling you the crappy Windows products in the last couple decades to now licensing things; it’s a better revenue generator for them.
Oracle ( NYSE:ORCL ) hasn’t quite had the same results. But the idea is that they’re going to get better at that. Lets look at the weekly chart. These guys are talking about valuations, they don’t have anybody talking about the technicals, and that’s fine. They’re just talking about valuations, about how if the company starts executing better, the market obviously thinks they’re going to, then the stock is going to get a higher valuation. So where are we now? On this weekly chart you can see the stock is right up at this prior resistance level, which was BELOW the 200-day or 40-week moving average. Now the stock is back above that but it’s still at this 40.00 level. What I want you to do tomorrow morning, I wouldn’t short into this by the way just because it’s actually not really up that much. It might seem like a lot on this chart, it’s up 5 percent, big whoop. What you want to see is the stock hold above $40.00. If the stock holds above $40.00 for say the first 15 or 20 minutes of the market, then at least it’s probably not going lower. It may not start screaming higher but at least it’s not going lower.
The bottom line for me is this: I don’t want to do anything with this stock at 9:30 in the morning. I want to see what’s happening. And generally speaking, from a longer perspective, I just want to be long the stock if it stays above the 200-day moving average. But zoom out a little bit, I know I’m going into a little more detail than I usually do but this is really important. Where’s the 200-day moving average? It’s right here. Which way is it going? It’s moving down. This is a stock that is in, just from an objective standpoint, it is in a defined downtrend. So it WILL take a while for this stock to be building some kind of a base. It’s not just going to gap up here and keep going. It’s Oracle ( NYSE:ORCL ) for crying out loud, This thing is a money sucker. So be careful about buying this. I wouldn’t own if it goes below 40.00.
Now finally Chipotle ( NYSE:CMG ). They came out and said they’re going to have higher expenses due to increased need for marketing. I get that. It’s funny that how when people eat your food and they get sick you’re probably going to need to up your market profile in a good way. So they’re also forecasting a Q1 loss. I would look at this from the opposite perspective. Sure that’s bad news, but the bad news is already now priced into the stock. This is giving you an opportunity to buy the stock closer to $480.00, closer to the 50-day moving average. Once again, the stock is in a downtrend, but this got way, way, way oversold. Now it’s kind of working it’s way higher. I would seriously look at this as a buying opportunity. Keep like a 4 percent stop on your position, so that you can contain your losses if the stock keeps moving down, and I think you’re going to be good to go.
3 Stocks I Saw on TV Free Chart