The Market Reacts To HP's $2.7 Billion Acquisition
In trading that saw the Dow up for the third straight session, the markets were propelled by weakness in the dollar, strength in the home building sector and positive reports from China on consumer demand and production. After the bell, the announcement that Hewlett-Packard's acquisition of 3Com , the stocks moved dramatically.
But with so many factors pushing the market, what are the best plays right now? The Fast Money Traders are giving you their strategies.
WORD ON THE STREET
With Hewlett-Packard buying 3Com for $2.7 billion after hours, all the buzz in the after hours market is on these two companies. As the market leader in China, it's an attractive buy for HP, says Pete Najarian, who shoots down any criticism that HP overpaid for 3Com, noting that when Cisco bought Starent Networks in October, they bought the company on nearly identical valuations of forward earnings.
Karen Finerman adds that holders of Brocade may be disappointed, as there was speculation an HP takeover could occur for that company, although she notes that you can't exactly count that out. As Jim Goldman reported on Fast Money, Brocade has takeover potential, if not from HP, perhaps from IBM who now has increased competition in its space. Also for IBM, Goldman has identified another "very realistic alternative" for an acquisition in Juniper Networks to compete with HP's newest move. For all of Jim Goldman's analysis, check out the video!
Another focus of this afternoon's announcement was that HP simultaneously released a pre-annoucement of their quarterly numbers which, Guy Adami points out, are set to beat street expectations. He sees the stock as cheap in terms of valuation and suggests buying the stock on dips as he expects the stock to go higher.
"The trade here is on Cisco," says Joe Terranova, who sees the stock likely to dip on the news, opening up a favorable buying opportunity around $22-$22.5, which he has identified as a proven bottom for this stock from last month. Guy Adami also looks at Broadcom , which may be set for a dip after this news, which could offer a similar buying opportunity as with Cisco.
Also making news in after hours trading, is another tech name, Applied Materials which reported earnings that far exceeded Wall Street expectations and announced cost-cutting measures that drove the stock up after the closing bell. "You've gotta be impressed with these numbers," says Pete Najarian, who thinks the upward momentum of the stock will continue. Guy Adami also points out technical resistance for the stock around $14, and doesn't advise jumping in unless you think it has a possibility of breaking out in the near term, which he could see happening if the stock closes above that resistance level.
Technology Chart Analysis
Fresh off the heels of HP's $2.7 billion acquisition, Carter Worth of Oppenheimer Funds takes a look at the company's chart to see what the numbers can tell us about the company's future. He points out that through 2008 the stock found itself in a tight range around $50, but plunged in 2009 close to $25. Worth suggests that the buyers from 2008 who experienced the dramatic drop will be quick to sell off the stock now that it is back up to its range from last year, and based on technicals he would be a seller of the stock at this point.
In the case of Oracle , the pattern is quite similar: experiencing a well-defined range throughout 2008 the stock collapsed in 2009 and is now approaching last year's levels. However, Oracle has been holding steady in this range for some time, and Worth sees the stock primed for a breakout, unlike HP.
Back to the Broader Market
Aside from the big moves in tech, the big story in the markets has been the weak dollar and the technical resistance level of 1,100 in the S&P . Today's market movement was also muted by the holiday trading, as bond markets were closed and volumes light on the NYSE.
"It appears that the market is more comfortable with the 1,100 level than it was the last time we were here," says Joe Terranova, who points out this level was also important in 2008 when the TARP and government intervention in the market was pushing stocks.
Despite the overall market resistance, Guy Adami points out a few names that have been steadfast throughout the resistance around the major indexes. Western Digital, Walter Energy and Raymond James are names he has identified as stocks that work, despite stalling in the overall market direction.
"We are getting the movement to support this kind of level," adds Pete Najarian, who highlights resistance levels in Oil, Copper, and the broader market, while the Volatility Index was marginally higher on the day.
The markets were also bolstered by news out of China and positive statements from UPS and Fedex about holiday expectations in the transport sector, but who is to benefit? "This should bode well for the retailers," says Karen Finerman, who also points out that much of the buzz for the retailers indicates a shifting of business to online retail than sales in brick-and-mortar stores.
"The numbers out of China were phenomenal," adds Joe Terranova, who also points to announcements from the Bank of England that took pressure off investors selling the US dollar, allowing the currency to strengthen slightly later in the trading session, keeping gains in the stock market modest.
US Dollar Hits 15-Month Lows, Gold at New Highs
With a weakening dollar pushing stocks this week, Gold and other commodities continued their rally in today's session. A Fast Money trader favorite throughout this run has been Freeport-McMoran , which Guy Adami likes on valuation, despite the company hitting a new 52-week high. "I think that's still the best metal play out there," he says.
Pete Najarian sees the analysts at Goldman Sachs as being spot on with their calls on the direction of commodities, particularly on their predictions around Corn, Oil and Copper, which they have targeted for upside movement over the next 12 months.
Joe Terranova is also bullish on the gold trade, as there is a natural buyer in the space: the world's central banks. Bringing up the recent purchase made by India on IMF gold, until the demand from central banks dries up, "you have to be long," he says.
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Trader disclosure: On November 11th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;
Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (UNG), Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Calls
Finerman Owns (BAC) Preferred, (BAC), (MCD), (MSFT), (NOK), (TGT), (WFC), (WMT), (YUM), (BKC), Finerman's Firm Owns (BRCD) Calls
Pete Najarian Owns (AMAT) Call Spread, Owns (DRYS) Calls, Owns (INTC), (INTC) Call Spread, Owns (RIMM) Call Spread, Owns (UUP) Calls, Owns (YHOO), (YHOO) Puts
Jon Najarian Owns (HPQ), (PALM)
Terranova Owns VIX Nov. 24 Puts, Owns (GS), (WYNN), (JPM), (SU), (MRVL), (BRCM), (GOOG), (RIMM), (AAPL)
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBC)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)
Credit Suisse Owns 1% Or More Of (HLB.AT)
(HLB.AT), (ABI.BR), (KOF), (FMX), (CCE), (KO) Have Been Investment Banking Clients Of Credit Suisse In Past 12 Months
(HLB.AT), (CCE), (PEP), (KO) Have Been Non-Investment Banking Clients Of Credit Suisse In Past 12 Months
Credit Suisse Has Received Compensation From (HLB.AT), (ABI.BR), (CCE), (PEP), (KO) In Past 12 Months
(HLB.AT), (ABI.BR), (KOF), (FMX), (CCE), (PEP), (KO) Are Expected To Be Investment Banking Clients Of Credit Suisse Or Affiliates In Next 3 Months
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