Though the trading week - and the trading year - may be winding down, there's still plenty of trading to be done. Among the top trading prospects, as well as the most-watched names, are Barnes & Noble, Inc. (NYSE:BKS), Vringo, Inc. (AMEX:VRNG), and Herbalife Ltd. (NYSE:HLF). Here's what traders are saying and seeing.
Yes: A couple of days ago when I first posed the idea that Herbalife Ltd. was a buy, the idea was not well received (which is to say readers scoffed, rolled their eyes, and called me some 'colorful' names). Now that HLF has rallied 10% since Wednesday's close though, the laughing has stopped. And no, I don't think the rally is over yet.
I said then and I'll say it again... just because Bill Ackman said it doesn't make it true, or in the case of HLF, doesn't make it relevant. He's actually right in some ways, in that Herbalife Ltd. is a pyramid, and there's no real barrier to entry for competitors. What he failed to explain is why that matters now. It's been a pyramid for year, and there's never been a big barrier to entry for competition, but that hasn't stopped the company from remaining wildly profitable. Besides, there's a very good chance Ackman is already done with HLF, having closed out his short the day after he talked it down. Despite investors' belief, he's not their friend warning them of impending doom. He's an opportunist, capitalizing on his clout. The smart money is already out of the short trade on Herbalife, but the stock's still well undervalued, and still due to advance. [Welcome to the game, by the way.]
No: Speaking of not winning friends or influencing people with my calls on stocks, I wasn't selected as the most popular kid in class by suggesting a few times that Vringo, Inc. was knocking on the door of a meltdown either. But, there it is. VRNG, which never lived up to the hype despite success in its patent suit against Google (NASDAQ:GOOG), officially went from bad to worse yesterday, and poured salt in the wound today.
How's that? Since August - even before the trial - a floor had developed at $2.81. It's been tested three different times since then, and the fourth time VRNG tested it this week, that floor finally buckled. Now with no technical support left to prop it up and no more good news in the lineup (all the suits that Vringo could feasibly bring are now on the table) to spur another rally, the fact that traders are losing interest is the gentle way of saying they're shedding the disappointing position. There's no telling where VRNG could make a hard landing.
Maybe: Last but not least, a rebound/trend I've been watching try to develop for weeks.... Barnes & Noble, Inc. Though BKS still hasn't technically put itself into high-gear, it's on the verge, and I suspect it's soon going to break out of its rut and hit the gas.
Forget the daily chart for the time being. Let's look at a weekly chart of BKS below, and then even a monthly chart (which in itself should tell you this is a longer-term opportunity). In simplest terms, this chart has been getting squeezed into the tip of a wedge shape [falling resistance, rising support, framed in orange] for well over a year. If you look closely though, it's starting to fight its way above the upper edge of that triangle... and if you look real closely, it's starting to find support at the 100-day and 200-day moving averages... for the first time in years. Though not yet perfect, this is pretty darn close to a perfect breakout move.
Just for a little extra perspective on BKS, however, take a look at this monthly chart. This storm's been brewing for a while, and though we've only seen sideways net-movement since this time two years ago, Barnes & Noble has slowly been getting pulled back into a slingshot, and that slingshot is about to be released. Note how the bullish volume is growing in the monthly timeframe. The $16.94 ceiling is the key catalyst on the monthly chart, but again, you may not need to wait for that cue.