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GrubHub (GRUB): 22% Win in 11 Days…

Jul 24, 2015

Not too shabby…

On July 13, I noted that shares of GRUB were massively oversold, ready to reverse given reads on MACD, RSI and Money Flow.

At the time, the underlying stock traded around $32.17. The recommended December 35 calls traded around $2.70.

As of Thursday, the stock sits at $33.86 after reaching an intra-day high of $34.50. The calls show a last trade of $3.30 – a 22% gain from our $2.70 entry.

I have a near-term price target of $36. When and if that’s hit, we’ll look to exit half of the recommended position.

All we had to do was buy excessive fear here, just as some of the world’s billionaires do. We recommended a trade on Caterpillar (CAT) yesterday doing the same.

No one ever got rich without taking on risk…

 

Caterpillar, Inc. (CAT): Could it be a buy here?

Jul 23, 2015

You may find this trade idea laughable… Most do, at this point.

But shares of Caterpillar (CAT) – now sitting at a 52-week low may be a buy here.

If we look at a five-year chart of CAT, the beaten down stock sits at multi-year support levels. As long as CAT can hold this level, there’s a chance we can make some quick money from an oversold bounce.

The fear may be palpable. But CAT isn’t going out of business any time soon. This sell-off is a near-term hiccup… Patience over the long haul could pay off very well. As we’ve learned from some of the wealthiest investors, the time to buy is when fear has reached highs.

Take Sir John Templeton’s Growth Fund – for example -- which averaged a 14.5% return for 38 years, trouncing the major indices… He would wait for a point of “maximum pessimism,” buy and hold.

In 1939, for example, as Europe was in disarray, Templeton bought shares of every European stock that traded below $1.

He made a fortune.

Or, as Warren Buffett has said, “A climate of fear is your friend when investing; a euphoric world is your enemy.”

Or, as we learned from Baron Rothschild, “Buy when there’s blood in the streets, even if the blood is your own.” His family is now worth $400 billion because of that, by the way.

Consider taking a small position in CAT up to $78… and have patience. If multi-year support levels are shattered, we’ll revisit.

 

 

 

LifeLock Inc. (LOCK): Trade the Dead Cat Bounce

Jul 22, 2015

There’s just no rhyme or reason to the market these days…

China, Puerto Rico, Greece, Russia, Iran, oil, gold… you name it. And it’s making a mess of the market.

The Dow fell 200 yesterday. We’re down another 90 today… after challenging historic resistance that’s given way to downside many times in the past. Unfortunately, foolish bulls just don’t pay attention all the time at nosebleed levels.

While I’d like to say we’ve bottomed out, we haven’t. We could easily test June lows of 17,500 before we even begin to see signs of an end. Even then, we’re still overvalued.

The worst is far from over.

But there are still news-related opportunities we can’t ignore.

Yesterday, for example, LifeLock Inc. (LOCK) was destroyed on Federal Trade Commission news that LOCK did not fulfill obligations related to a 2010 settlement. But the claims raised by the FTC are related to the past, not to current business practice. The impact on growth should be small, in our opinion.

All we want to do here is trade a bounce off oversold, over-extended conditions and walk away. We’re not looking to invest here.

We’re just looking to trade this, take our money, and run…

Consider buying just the LOCK stock up to $10.

 

iShares NASDAQ Biotechnology Index (IBB): Buy on Dips

Jul 21, 2015

Even after countless headlines of biotech bubble doom, Janet Yellen’s July 2014 warning of stretched sector valuations, and terrified overreactions to news, we still argued for further upside in the sector, as 10,000 baby boomers retire by the day, and as new healthcare coverage and treatments emerge. 

We’ve been making the same argument over and over again since first recommending the IBB at just $80 a share. It came within cents of hitting our $400 target today.

That’s a gain of 400% in just seven years.

We’ve heard the same bubble fears many times over the years. But what investors seem to forget is the baby boomer catalyst, a 20-year trend that just won’t fade.

While I strongly believe the IBB will hit $450 before 2015 ends, we have to wait for a pullback in the name first. Not because of changing underlying fundamentals. But because there’s a technical over-extension in my momentum indicators that gets us in and out before short-lived moves lower.

Let’s wait to buy more of the IBB until we see a good pullback to at least the 50-day moving average.

 

eBay (EBAY): Why it’s Time to Go Short

Jul 20, 2015

Shares of eBay are being bid higher after an impressive earnings report, and on news that it spun off its payment-processing unit, PayPal (PYPL). But with the stock moving well into overbought territory per MACD, RSI and Money Flow indicators, a near-term pullback is likely before a move higher.

At least… that’s what we’re betting on here.

I’d like to see a pullback to at least $26 before we think about taking a long position in EBAY. For now, consider shorting EBAY. No options are available.

We can also look at just how technically over-extended EBAY is with a look at the upper Bollinger Band (2,20) with an overbought read of near zero on Williams % Range. Again, look for a respectable pullback before going long the name.

 

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