3 Stocks I Saw on TV (HRL, CRM, HYG) – May 21, 2016
HRL CRM HYG
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, to take advantage of 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 look at Hormel ( NYSE:HRL ). Cramer had the CEO of the company on Mad Money. The guy had a lot of good things to say. The thing that got my attention was that they bought the Justin’s brand. That’s like the good stuff, peanut butter, cashew butter, almond butter, all kinds of stuff. To me, you know what I call that? Dessert. I like that stuff. But that’s not compelling enough to want to buy this stock right now, and here’s why: If you look at this, just look at the technical damage that has been done here. This would be known as a head and shoulder pattern. Left shoulder, oh, it’s a higher high here, that’s the head. Lower high, that’s the right shoulder. The neckline connects this low and that low. There’s a couple bad things. First of all, on the way up the left shoulder just confirmed the 50-day moving average support. Just like it had done how many time here, you count them, I don’t have to. And then finally the stock, I would imagine that this was the last earnings. Big boom, pop, and then a trickle sideways, and finally down.
So this was really, in my view, kind of a crescendo top. I can’t really say it’s a blow-off top, because when stocks blow-off like this, it’s literally the blow-off where, up like that. Boom! This thing goes down. This didn’t do that. So this is a little bit like just a gradual topping pattern. Well, these earnings really took this thing home. Below the 200-day moving average, on volume. You can expect some kind of a rebound. But as I look at this, you’re going to see a lot of resistance right here. Right here, if the stock does rebound. And you know, maybe the market missed something. Maybe traders aren’t seeing Hormel ( NYSE:HRL ) for what it really is, and all that. I get that. But maybe they are. And maybe the fact that the stock was up as much as it was here, there’s just nobody remaining to really want to buy this stock.
After all, this puppy went up quite a bit. It’s a food company, okay? It isn’t Google ( NASDAQ:GOOGL ). This went up almost 100 percent from this August low in 2014. This is one value guys buy the stock. The smart money, they buy the stock. They’re in here, obviously a lot of sideways drift here. A lot of profit taking. A lot of distribution, and then, Boom! The stock starts taking off again here from $18.00. This was a heck of a run. But if you look at this on a weekly chart like this, this is pretty clear. This isn’t a buying opportunity. If you’re a short-term trader, sure it is. I’m telling you, this is not a buying opportunity. Ultimately, the stock may go lower and then you can get it, etcetera, etcetera. But I would rather buy the peanut butter than this stock right now. It’s made it’s move, end of story.
Salesforce ( NYSE:CRM ). Cramer had the CEO on Mad Money Thursday, I just didn’t have the chance to cover it. They had awesome earnings, the stock gapped up right into this resistance area, right? In fact I remember talking about this when I think about it. I’m just coming back to it. The stock gaps up into resistance, didn’t sell-off hard, but it didn’t go higher. So we can look at this on a weekly chart and see this is not the time you want to be buying. Ultimately, sure. But if you’re a trader, right here, 82.00, 82.50, 83.00, this is where the top is. Give this thing a chance to settle down. My bet is, with the market the way it is, you’ll get an opportunity to buy this thing in the high 70’s, maybe even the mid 70’s.
Okay, then finally HYG ( NYSEARCA:HYG ). This is a high yield corporate bonds, basically the crap bonds. Dan Nathan was on, I think it was Options Action or whatever, talking about this big, huge bearish bet that a trader made on the HYG ( NYSEARCA:HYG ), buying about 3 million dollars worth of puts. That’s essentially betting on the stock going down to like 73.00, 73.50 or something like that by the end of the year. That’s a huge bearish bet. And you figure anybody that’s making that kind of bearish bet, with that kind of money, 3 million bucks, hey, where I come from, that’s still a lot of money (but then I’m in southern California). So that’ got to be smart money, right? Okay, maybe, but have you seen Bill Ackman lately? That guy makes big bets and they don’t turn out so well.
So there’s a couple things I’m thinking of; three things. First, the guy could be right and we could see a huge implosion in corporate bonds, which means that yields are going to spike. And if that happens, then frankly, all of our problems will be bigger than wondering if this guy got paid on his puts. So that’s one way, that’s one thought. The other thought would be, maybe the guy is just wrong. Okay, it happens. The third thought would be, the minority view. This is the one I don’t really hear anybody talk about. Here’s my question, how do we know the trader BOUGHT those puts? How do we know that a trader, a fund, whoever, how do we know they bought those puts? How do we know they didn’t sell them instead? And I know what you’re thinking, “Well Dan, they bought the puts because they traded on the offer. They had to pay up for them in order to buy those.” And I would kind of question that.
Maybe that was the case, but maybe it kind of went something like this: Call up their local broker, they’re trading desk, because they’re big swingers, right? So they’ve got trading desk guys that move a lot of stocks and options around. And they say, “You know what? I want to sell some puts, because the way I’m looking at this, I think this is breaking out. I want to go ahead and sell some puts.” And the trader, we’ll call him Vinnie, aren’t they all called Vinnie? The trader says, “You know, sure, we’ll let you sell some puts, here’s where they’re bid at. We’ll go ahead and take them all.” And you say, “Well, wait a minute dude. Not only are you getting a pretty big commission on this, but I’m giving you time to hedge your position. It’s no like I’m doing this online, I’m calling you up and I’m saying, I want to be selling these puts because I think they’re going to expire worthless. That means if I’m selling them, you’re buying them. And you’re buying in such quantity, I’m not selling them at the bid, I’m selling them at the offer. So figure it out and lets make this trade.”
Answer, if I’m Vinnie I’ll say, “Okay give me a bit and I can make that happen.” And I go do my deal, Bam! The print goes off on the offer. Now magically everybody thinks that somebody made a bearish bet. And all it really was, was Vinnie covering his bet. So that’s what I think, it could be one of the three. Just don’t think that the smart money is always smart. Because sometimes, it’s really not.
3 Stocks I Saw on TV Free Chart