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tv   Fast Money  CNBC  October 22, 2013 5:00pm-6:01pm EDT

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marcus -- all day coverage tomorrow begins tomorrow and we will crown a champ right here on the closing bell. have a great night everybody. i will see you tomorrow. stay right there. here is fast money right now. >> this is fast money. america's post market show. i'm melissa lee. here is tonight's line up. record breaking rally. the force is with the rally how apple got its groove back. and after hours action big moves tonight hitting all the earnings movers you need to watch right now.
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and that is is the momentum trade going up in flames? netflix posting a monster reversal today after surging on earnings touching on a high making for 17% drop from the highs of the day. so is this the beginning of the end for the high flying momentum names? big losses across the board here. >> listen, netflix is a pretty isolated situation. the story is the story that has been separated from the market for the last couple of years. today's chart, the price action reminds me of liquidation. the volume was massive in the last year. 25 so that is kind of healthy in
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a lot of ways. >> is this actually a positive way. >> for so long we have been saying the s&p 500 has been making new highs. don't we want to see participation rolling into the market? is that what we're seeing with money coming out of the momentum stocks. >> i think they wind up right bhak into the momentum plays. >> and doc, i'm wondering if option players own a pop, a recovery in the names. >> on the other hand everybody was saying people are going to be selling hard because they need to raise money for twitter.
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>> take a look at the money that goes in and out of these stocks on a daily basis. they don't have to sell much to get into twitter. far too many hedge funds do. i didn't see google breaking down. look at google. it was up on the day. so it was isolated to netflix. did it trickle over into groupon which had a pretty big downgrade? >> you make a good point. but the high value valuation and reasonable valuation. no one believes that netflix will really be able to grow into the valuation.
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>> credit suisse put out a report. all of those names were up about 16% from where they made the call. they didn't buy it all the way back. they bought it half way back from that dip. >> so you're not concerned about price line. you're not concerned about google or tesla? >> he wants to show us his candle. it's a specific bearish technical signal. >> let's talk about japanese candle stick charting. something major happened.
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i think every momentum trader in the country is focused on. this doesn't go back very far. this price action today is a bearish engulfing candle. and the reason why that's important is this is a stock that traded 8 times its normal daily average. if you're a short term trader you go short netflix, what you probably used is your reference point or your stop loss was yesterday's high right here. same thing on the downside. longs come in. they are using yesterday's low. boom they're gone. now you have a selling frenzy. when you see a candle of this nature typically what follows
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is a change in trend. it needs time to work that pattern off. and not only is it bearish in candle but it's -- you don't want anything to do with that. >> that was a beautiful description. josh is not even alluding to the sentiment there. to me you have a situation here where the shorts have been annihilated. when this stock was trading $200 lower. about $300 and to josh's point the previous day close. >> i get that. >> i would agree with dan and i
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would say where things could get really interesting is over here. that's where the shorts were faked out. you can see they biled in. you had a nice russell off of that. >> i get the bearish engulfing candle. but at the same time didn't the options market tell us that there would be a bearish engulfing candle. >> what was really interesting here is this is a name that typically moves. but a lot on earnings kind of what dan was talking about. the options market have also given up on really getting short the name. it looks like desperation
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buying. weekly call buys have been 350 to 400 call strikes. that wess do nilly interesting to me. when you wanted to get short something you had to wait for a day like this. the kind of shift where you would open on a gap higher and close lower. i think maybe call puts calendars would probably be something like that. >> mike i agree with you on the puts. they bought them all the way down from 360 all the way down. and on the five minute you were
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seeing a million shares go by. all the way down from 390 all the way down to 330. there were nearly 12 or 13 this stock normally trades $2.8 million a day. that means state street. >> i think he may have finally talked us into letting him sell some. >> do you see bearish engulfing candles? >> nothing notable. these things pop up and once
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they do the traders having fun with them they say wait a minute, something is clearly changed. i don't know what it is fundamentally. but there is a difference of opinion within the holders of the stock. >> the trade of the day. still ahead, nathan will unveil a stock that he is daring to go short. the company has only made $74 million. tesla has made $18 billion in market cap. it has lost $220 million. facebook gained 75 billion in market cap. and amazon continues to lose money. so do profits actually matter for these momentum stocks or not? >> hi it's good to be here
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although you are scaring me with those numbers. >> you see a day like today. do you think that investors are rerating the way that they value the companies? >> you know growth and momentum, you know is going to drag a lot of volatility with it. >> so many have gotten to that stale plateau where the only way they can grow is to buy growth. >> let's talk about twitter. you were an early investor in twitter. you're the perfect person to ask. 36% of people who join twitter don't use it. all of these stats out there. facebook has 700 million active
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users. what kind of valuation does twitter deserve versus facebook? >> twitter is a much it's different in that it has the potential to be a great business tool. i have seen a lot of people a lot of serious business people tune their twitter feed to be their first in the morning download. and i know talking to a tv program that may not be what you want to hear but that's happening more and more. i think what's going on is they figured out how to make it work. now we're all trying to figure out how best to use it. as we figure that out, it will get more valuable. >> when it comes to netflix you were in netflix.
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>> i think i want to wait again. a battle stock. . the bears are having their day. >> thanks for your time. >> let's get a market flash. let's see what happens happening here. i have got two big name movers for you here. the maker of products rather reported results in line with estimates.
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and receive an investment from the company as well. >> all right. thank you very much. sorry i'm looking at this computer here. we do have a filing here that we're trying to go through confirming carl icahn has sold part of his stake in shares of netflix. this point we're still combing through this filing. it's up here on my computer. >> it's looking like 2.9 million share s shares. >> we will continue to go through this filing. reporting the sale of almost 3 million netflix share ss netflix shares down by about 1.5. >> call the candle. >> more on this when we have it. coming up does apple have its
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groove back? hold on. carl -- >> he just tweeted. >> he tweeted that he sold his stake in netflix. >> sold block of netflix today. >> and then he looks at the sec filing. >> it was probably one of his greatest trades. >> ever. >> might be one of the greatest individual trades ever. >> yesterday session alone, carl icahn made on paper $313 million in one day alone.
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he was on the board. >> how do investors treat this though? do they say now it's a buying opportunity? it's so hard to marry those two. i have an answer. when a stock is trade inging this changes that mentality. and now and it's like waking up the next morning. it doesn't look as predy. >> as soon as you get that weight people want to rush in and grab it.
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he walked away from it. that's great. you have the ability to buy a stock that may not be out of momentum. >> this is not his entire position. >> if he thought it was headed to 500, he probably doesn't sell a block. >> say the right thing. >> when you look at these name ss when google rallied. you don't have to lock them on. >> he may have just bought puts against the rest. >> you don't want to take the
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other side. >> but he is lightning up. >> there were an awful lot of folks who were wishing they could get in at these levels. now we are at that lower level. do the people have the intestinal fortitude or is it all carl icahn. and that level that josh was talking about was 288. if google holds a thousand it eegs still good. >> we will have much more on this. carl aicahn selling a part of his netflix stake. the stock is moving in the after
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>> every time i read a story about netflix being the highest appreciating stock that was the
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exact headline we used to see in 2003. and you know you can definitely, we have a sense of momentum investors driving the stock price. >> talking about how he is worried about the stock price. and carl icahn selling a block of his stock. his cost base is $58 a share. but he also says that i have learned when you're lucky or smart enough to have made a total return of 457% in 14 months it is time to take some of the chips off the table. >> this is something that i talk about a lot.
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something that is critical. carl didn't make a rookie mistake. carl took money off the table. that's what you should do every day when you make money. it's not all about holding the stocks or buying them. they're not your kids. you trade when you're in the stocks. you take money off the table here when you have got a big profit. >> it would seem a fairly bullish sign. >> look the guy has put billions in his pocket here. >> the news was about as good as it gets.
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that number was really big. here's the fear right now. if they cannot do this they have all of these commitments, this is why you sign up for netflix. you know from 20 years ago. they still have to pay the piper. this is why the stock won't do it. >> okay. let's go around the horn very quickly. >> if it gets below 00 i would be a buyer. >> only in a fantasy league. >> wait to see the 290 mark.
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i would rather be a buyer than a seller. >> does am have its mojo back or not? which some people might say it's a very good sign. no matter what apple did, it's no good. more than that i think they like the aggressive nature of giving away the aps for free.
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that's like a whole new dimension that nobody has really thought about. that is the service of the company. >> i got to take issue here. the service is company has been an absolute disaster. it's a horrible service. i have got to be honest with you. i think they should go in and buy yahoo!. it's got to be something that lives up to the i tunes experience and they just don't have it right now. >> gene follows apple for piper jaffray joins us. great to see you. >> good to see you. >> you have played around with some
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some. >> they are probably going to grow with the higher priced products. they will probably continue to lose share. you will see them beating the number. but i think from a share point, i think apple is fine with that. that's going to come with a higher gross margin.
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i did get these numbers. your counter part over here. he said that to date or through d before the quarter they sold 155 and change million units which would imply under 15 million for the september quarter. what will that do in terms of street expectations? >> in terms of our math we came up with about 14 million. i think what's more important is there is a throw away. they already updated that at the very end of the quarter. i'm talking about strong. and number two, just more optimism around the gross margin. >> thank you. >> let's get another look at the netflix story.
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when carl sells it would be a clear negative for the stock. the stock down 23 2.7%. is this a negative? >> he's such a savvy experienced investor. so sit a tell that some players i want to respect that. >> what levels are you looking to test? i'm just trying to understand. there are not many people who can have that lexry and having that 457% return. >> it's one of the most impressive picks that i have seen. it's rare to see this kind of reversal.
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but i will stick to the basic point. remember there is a lot of international losses. our read on this is fundamentals are improving. you buy the stocks on these pull backs. >> the target from 3:30 to 4.40 maybe he started selling little by little. if they cannot continue to grow overseas. >> that's a good point. look i think what's so interest something they have got almost 10 million international sub ss we
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think they're going to enter . >> mark real quick question. because of carl icahn and how smart this guy is the people are going to slam the stock, do you believe as i do that he is likely to have purchased over the counter puts because we didn't see listed put activity enough that would have covered him? do you believe that is a likely outcome? >> john you're so much savvier
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at that stuff than i am. i don't think there is anything fundamental that would cause him to change his opinion. i think he is taking advantage of a very substantial unusual profits. >> it could send the shares down down. >> this is and also you put it into perspective. like the news comes out in the stock. maybe we would have had more of a reaction. maybe we trade off a little more tomorrow. maybe not. fundamentally speaking it is very attractive.
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>> also more color about the sale. the bulk of the sale actually came today. so this could have been an extremely well timed trade done by carl icahn. >> when i said i would rather be a buyer than a seller that's why people buy these stocks. they buy it for growth. >> we will have much more on netflix's moves in the afterours session. much more fast straight ahead.
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>> i told you that. i tell you that. he doesn't believe me. >> i believe you but you guys chak your mind a lot. got to make sure you we're current. >> the credit goes to the two guys that run that fund. that run that account. they both have a huge success the last three years. one is my son. i really wanted to sell it my son threatened to leave. my son. and i raeply helped that kid all my life. >> it's interesting that he did say he was going to sell it 100 points a go. he is selling it now. i think if he would have sold it back then the top is in. >> yeah. there is no way of telling. back when the stock was 75 100 bucks lower saying he hadn't
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sold a share. apparently they did agree to selling parts of the stake. of course this after the stock hit another all time high during the session. and now we know that the bulk of the sale that icahn made today was today. the bulk of the sale in total was made today. mike, does this sale factor in at all to your analysis of the stock? >> not really. i thought that mr. icahn would sell a lot sooner than this. i don't know what he saw at $60 that you know didn't look like a bargain to him to sell at $200, but he stuck it out the other direction. and i think this is just an indication that the stock has had a run. it's had its run.
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i don't think that this is an indictment of netflix or that icahn wants to believe in the company. and i think icahn is doing what a prudent investor is going to do in taking a profit. i don't think an indictment of the company. >> he said that the stock may have had its run. do you think that this is sort of the last straw when it comes to believing in this momentum name? there are plenty of investors out there who rode this train for so long. today we had josh at the fast money desk outlining a bearish technical take on the stock. >> i mean sooner or later, cash flow is going to catch up to netflix. and if you look at their net income the last five quarters page one of their investor
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letter, it's positive you know $85 million or so. $81 million. if you look at free cash flow it's negative 83 million. they earned $81 million and they spent $173 million of it. that's content cost which has a very short life. two years, probably. that's going to hit the income statement and when it does earnings are going to disappoint. i think that maybe investors are finally beginning to see that. the share prices is merely the present value of future cash flows. what do people expect in the future? >> thanks for your time. appreciate it. >> we have been talking about it all evening. some think that the rallies may have hit a wall.
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mike, what did you see? >> it was interesting. all three of these names did see above average. amazon, probably 50% and groupon about 70%. more bearish bets overall. >> and what -- what is it out to you. >> one that stood out to me most was an institutional sale in weekly call sales specifically. this is is a call spread that is going to expire at the end of the week. $10 wide. this is just out of the money and we saw people selling more than 1500 contract blocks for only 35 cents. somebody who is doing something like that is risking the pull value of the spread to make just the amount of premium collected. this is somebody who obviously thinks that price line's run for
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the time being may have topped out. >> dr. jay, which of these momentum names do you like right now? >> i would stick with google as far as those momentum names and apple. i like apple. i think they're going to blow it out. that's why i'm wearing my tim cook shirt. i think they will blow it out as far as ipad. the other man in black, the first man in black johnny cash. i think retina display, ipad min mini is going to rock. keep in mind $300 goes through the max store. they will be rocking into christmas. >> it is like a nightclub bouncer that would not let me or my friends in. you look intimidated. >> or another tip like that on netflix
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netflix. >> momentum play tesla, buy it around 170. google has to hold $1,000. apple, i think they need a new product. >> more options action every friday and also check out the website options after the break we are getting back to the market. we are looking at four stocks in the space before they report on thursday. ford southwest, united and u.s. air. and then the whole foods call goes up in flames. find out if he is changing his tune. that and much more straight ahead.
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>> twitter just filed a new amended s-1. the first piece of information is about its credit facility. kay lahad reported that twitter was in talks for credit facility of up to $1 billion. the second nugget is about twitter's acquisition of mobile ad company mopub.
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the deal is expected to close in november. >> thank you. in case you missed some of today's top moments, here is is a rapid fire recap of tonight's executive edge. >> we have been a huge bull on netflix. when it broke through i think it was 3:12 just in mid september. we thought valuation had gotten full. now looking at where the stock is this morning. >> i'm not smart enough to know about grand bargains. i just know that as an american citizen and someone that has responsibility for 80,000 employees you expect the most powerful wealthiest government in the world to figure out their problems. >> up $148,000 september non-farm payrolls increased by 148,000 jobs. the unemployment rate is 78.2%.
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>> the whole uncertainty of obama care really affected the mentality they don't know what it's going be. they can't analyze it and know what is coming ahead. they're not going to hire permanent people. >> how do we grow this economy at 4:00? how do we get 4% at one? and then the product of that growth would be -- you know it's not jobs. >> all right. and we do want to point out, of course based on the sale of icahn's partial stake of netflix that he made about $800 million by selling 3 million shares.
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coming up next a sharp call against whole foods blowing up one of our traders.
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>> i'm short the options and to me makes no sense. expected to grow mid teens for the next few years. i just don't get it. this is very much a domestic play. their growth is going to be overseas. to me i do not want to own -- >> since that bearish call whole foods is up 24%. dan? >> this is probably a good entry. it is 10 higher. i was long puts. to me this is why you define your risk in cold stocks like this. >> dan has got the trade of the day. >> today you know when i saw netflix and some of the names coming unhinged i bought some in november. here is a stock that is up 100%. it's trading at 53 times earnings. at some point this thing's going to turn and you will want to pounce all over it.
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i do not know how you commit new capital to it. >> this is is a stock that closed at session highs and one that did not become unhinged as stocks got unhinged. >> here is the problem with shorting this stock. we live in a sub 3% growth world for all intents and purposes. so where portfolio managers are able to find top line growth they are demonstrating a willingness to overpay in terms of earnings. that can go on for a long time. >> so no? you would not short it? >> there is so much else here. >> define risks with puts.
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wg >> time for the final trade. mike? >> i like selling out the call spreads on facebook. >> i'm buying iyr. >> josh? >> it continues to barrel higher. i like it a lot. >> dan? >> if you're feeling randy, i think you can take a shot at chipotle. >> google. i'm still long. i still want to see it hold a thousand for a couple days before i suggest you get into it
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at this level. >> thank you so much for watching. see you back here tomorrow at 5:00. netflix lower in the afterhours session after carl revealed selling 3 million shares. "mad money" with jim cramer starts right now. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to make you a little hundred. my job is not just to entertain you, but to teach and coach you, so call me at 1-800-743-cnbc. this time
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