3 Stocks I Saw on TV: YHOO, VRX, ADS (February 19, 2016)
If you’re a hardcore trader, like me, when you get up in the morning and go into your office one of the first things you do is turn on CNBC. You see Squawk on the Street, you see Opening Bell, you see Power Lunch, Closing Bell, Fast Money, Mad Money, you see it all. And the one thing that rings true, on every single day, is there are a lot of stocks to be looking at. Well, you can’t look at all of those stocks, so guess what? I do a lot of it for you in this video series, 3 Stocks I Saw on TV, I talk about, basically, 3 stocks that are topical, 3 of the ones I find most interesting. Today we’re going to look at Yahoo ( NASDAQ:YHOO ), Valeant ( NYSE:VRX ), and Alliance Data Systems ( NYSE:ADS ).
First, Yahoo ( NASDAQ:YHOO ). Here’s the deal, it was big news on Friday, that the board IS exploring options, they’ve been exploring them for months now, but it’s big news that they are actually exploring options. I think the deal is you’ve got Marissa Mayer, did a really nice spread in Vanity Fair, or maybe it was Vogue, or whatever it was, very sexy CEO, right? It hadn’t really helped the stock price, though it has helped her profile. Look, when they ditch her, and ultimately they will, she’s going to get like a nine figure parachute, which is really pretty nice for her, not so much for the company. But this is the deal, you want to be selling into strength like this, NOT SHORTING because somebody could buy them, whatever the case may be.
And you can bet that if there is some kind of deal to be struck it is not going to be a deal that’s going to drive the price lower, it’s just not going to happen. So the only way some kind of deal would be moving this stock would be in the upside, in the upward direction. When you look though, you’ve got to stay true to the technicals. When you look at the weekly chart you can see, frankly, a pretty nasty head and shoulder pattern here. First of all lets just draw the line here, you’re going to look a the left shoulder, a head, and then a right shoulder. So the stock looks to me like it’s ultimately going lower. Again, unless somebody does something that so far nobody has been able to do. So I would just say, if Yahoo ( NASDAQ:YHOO ) comes up into the low to mid-thirties, if it comes right back up here to about the 200-day moving average, I think that’s when you want to get rid of the stock. It just, to me, seems like a real risky trade. But don’t be selling now, let the stock come up more so at least you’ve got money.
Okay, the next one, Valeant Pharmaceuticals ( NYSE:VRX ). This stock has been absolutely crushed, much to Bill Ackman’s chagrin, and it’s even lower now. It turns out Wells Fargo issued a warning and they dropped their valuation to an area that’s not even on this chart, 65.00 to $68.00 is really where they say is a nice area to buy this stock. But here’s the deal: Like Yahoo ( NASDAQ:YHOO ) this has been trending down for a while, including here. So you’ve got this sideways consolidation right at about $85.00. This stock is NOT heavily shorted, not at all. If this stock starts falling lower, I guess you could give it till 80.00. But I’ll just say, if it starts falling to 83.00, $82.00 or so, I think that you can short this stock as long as you have a BUY stop. In other words if the stock reverses you’re going to buy the stock back at a certain point, I’d say a little bit even below 90.00. This is a really tight trade, I’m giving you really tight parameters, but it is that kind of market. What I want to see you doing is, I want to see you selling the stock as it falls down out of support. Because if Wells Fargo is right, you’re going to have a nice 15, 20 percent return in a fairly short period of time.
Then the last one here is Alliance Data ( NYSE:ADS ). Now Cramer was talking about this company yesterday on Mad Money. This is a company, they’re essentially a marketing strategies company, loyalty cards, stuff like that. Look at the weekly chart, forget about all this here, this has been like Icarus. After breaking out in 2011 the stock went up almost 300 percent and all of this could have been a high base. The stock consolidates, literally for a couple years and then goes off to the races again. Well that didn’t happen. Just as a general rule, frankly, stocks that do this over multiple years, and then do that, don’t often do that. Sometimes they do, but this is generally not the pattern. It’s kind of like, okay it ran it’s course, competition, excessive success brings out competition, it’s undoubtedly what’s happened here. I think this stock is just oversold.
I would agree with Cramer, certainly agree with Cramer that this is a buy, right now, but for different reasons. Jim likes this because he thinks it’s a value stock, it’s at a good value now and all that. Okay, that’s fine. He thought that again, this was on Thursday when he mentioned this stock, it closed up 3, 3.5 percent, not that big a deal. I can see this stock going up, maybe even to try to fill the gap, that’s about 10 percent. I think you can buy this stock right now, but only because it’s really kind of oversold, still, when you look on the weekly chart. This is still an oversold stock that could likely rally higher. On the daily chart you can’t really say it’s oversold, you can say it was here and then it’s just working off that oversold level. So buy this, nice little tight stop we’ll say 5 percent. Put a 5 percent stop underneath this and then when this starts hitting 225.00 or 230.00, that’s when you really snug up your stop. So you’re riding this up, but don’t be a true believer in this stock. I get Cramer’s value trade, I’m just looking at this as a stretched spring, a stretched rubber band, that’s now reverting to the mean.
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