Posts by Philip Pearlman

  • Fat zapper: Stock to short or the real thing?

    Philip Pearlman at Yahoo Finance 1 yr ago

    ZELTIQ Aesthetics, Inc (ZLTQ) is a medical technology company that makes non-invasive fat reduction products. Its CoolSculpting procedure, which has been FDA approved for treatment, works by essentially freezing fat cells below the surface of the skin.

    For the better part of 2014, ZELTIQ has been trending lower from a high just above $22 a share in January of this year to a recent closing low of $14.77 in July.

    Last week, according to AlphaTrends founder Brian Shannon, ZELTIQ broke out from its down trend and now has room to run higher.

    Shannon notes that while the stock was moving lower during 2014, short interest was increasing dramatically, reaching in excess of 10% of the float with a days to cover reading of more than seven days at average daily volume.

    So, with the stock price now beginning to move higher, we are likely not only seeing fresh buyers but short covering as well, with the potential for a short squeeze as well.

  • Yahoo Finance contributor Carl Icahn joins Tumblr

    Philip Pearlman at Yahoo Finance 1 yr ago

    This morning, we’re launching Yahoo Finance Contributors. We’ve lined up a truly all-star cast to publish content on their Tumblr accounts; the content will flow right into Yahoo Finance pages, ticker pages, widgets etc.

    In effect, we’re opening up Yahoo Finance, the largest finance site in the world, in a scalable way, and socializing expert-generated content through the awesome powers of Tumblr, while bringing on board some of the very smartest minds on the street.

    The contributors will bring even more seasoned, smart and novel analysis to Yahoo Finance, and that is really our main objective  — to fortify our site with more goodness for our readers.

    The contributors at launch include people you are likely familiar with, such as Carl Icahn, Jim O’Shaughnessy and Josh Brown. But, in a way, I’m most excited about the prospect of bringing incredible market participants and thinkers that you might not be familiar with to the forefront.

    We hope you enjoy!

  • Why stocks are 'underreacting' to the destabilization of Iraq

    Philip Pearlman at Breakout 1 yr ago

    Last week, it started becoming clear that the situation in Iraq was quickly taking a turn for the worse. Things have unraveled further this week as the Sunni militant group, the Islamic State in Iraq and Syria (ISIS), continues to attack more cities throughout the region. This is a fluid and quickly shifting situation; earlier today, CNN reported that ISIS has advanced to Baquba, only 37 miles north of Baghdad.   To date, equity markets have not really responded negatively to the destabilization of Iraq, a nation with the fifth-largest oil reserves in the world. The S&P 500 (^GSPC) lost 0.7% last week, but that's a very minor giveback after a three-week long rally which added 3.8% to the index.   Crude oil futures have rallied about 5% over the last 10 days. But even there, the argument can be made that price is not fully discounting risks that are suddenly becoming apparent. Crude futures have not yet challenged 2013’s highs just above $110 per barrel and were recently trading at $106.64.   Perhaps the ungluing of Iraq is no big deal and financial markets are responding rationally to what appears to be an accelerating risk, but really is not a threat to the continuing, albeit subdued, economic recovery.   On the other hand, perhaps the market is behaving in a way that is familiar to behavioral economists - by underreacting to new and surprising information while market participants only gradually process the new information. Markets tend to oscillate between overreaction and underreaction. This has been supported by a variety of behavioral economic research. MIT professor Andrew Lo summarizes over and underreaction phenomena succinctly: “A common explanation for departures from the efficient markets hypothesis is that investors do not always react in proper proportion to new information,” he writes. Put another way, people are not perfect information processors and it takes us time to fully wrap our heads around the implications of new and surprising information. If the human brain is like a computer, it's more like a Commodore 64 than IBM’s (IBM) Watson. Overreaction is the term used to describe situations in which a broad market or a specific asset continues to move in a direction significantly past what given measures deem fair value. It is a byproduct of momentum, where new money continues pouring into an asset over time, in part, because the asset has already risen.   Underreaction tends to occur when surprising and fundamentally relevant information becomes public. It occurs, in part, because humans do not perfectly and fully process this new information instantaneously, but, instead, only integrate it gradually over time. The most common form of underreaction occurs when a company reports a large earnings surprise. Often, the stock will move in the direction of the surprise, as some participants process the new information quickly, and then drifts in the same direction of the surprise over a period of one or a few months.   More Questions Than Answers As the U.S. Government, the media and the markets were all caught offguard by ISIS’s sudden and aggressive moves in Iraq and Syria, perhaps, the muted reaction in equities is a case of underreaction and we are setting up for a further drift lower in stocks as investors further process the new dynamic. The tendency with underreaction patterns is that magnitude of the initial move on the surprise, to some degree, anticipates the magnitude of the continued drift in the same direction. If that is the case, then markets might experience only a very modest amount of downward pressure given the shallowness of the last week’s sell off.   Perhaps the market is almost fully processing the Iraqi situation but does not view it as bearish at all, and instead interprets recent events as another opportunity for the U.S. Government to spur industrial growth via increased defense spending - in other words, an economic tailwind. Notably, the invasion of Iraq in March 2003 occurred at the beginning of an incredibly bullish period for stocks; the S&P 500 rose 36% in the ensuing 12-months and 50% over a three-year period. However, the beginning of the Iraq War coincided with the end of a huge bear market spurred by the bursting of the Internet bubble. This is a very different situation than we have today, but it does warrant some consideration. Perhaps we are in such a bullish phase for stocks, the market has been negatively affected by Iraq and is simply going up less than it otherwise would be. My own guess is that the muted equity price response and even the less-than-expected rally in crude oil is more a reflection of the continuing uncertainty of the situation. In sum, markets have no idea whether this is the beginning of a much larger and entrenched situation, or if it will be contained and will wait for clarity before making the next move.

  • eBay’s got 99 problems and Amazon Payments is just one

    Philip Pearlman at Breakout 1 yr ago

    While many are focusing on the event Amazon (AMZN) will hold on June 18th and the launch of its first phone, the more important news might center on the further development of Amazon payments.

    Amazon wants to make it incredibly easy for its users to pay for goods and services of other merchants without having to have a credit card on file everywhere else.

    The payments space as a whole seems to be heating up at an accelerating pace recently and Amazon, with more than 200 million e-commerce accounts complete with credit card numbers and a trusted brand, could, to quote a 1990’s Jeff Bezos, get big fast and challenge eBay's (EBAY) Paypal for payments dominance.

    In fact, and while it's a long shot, I would not be shocked if, at next week’s event, Amazon announced functionality built into its new phone that made it incredibly easy for consumers to make payments.

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  • Choppy stocks, strengthening bonds highlight deep divergence

    Philip Pearlman at Breakout 1 yr ago

    Heading into the end of the week, the stock market seemed to take to heart its mandate to frustrate the majority of participants most of the time.

    It was a tale of two markets. Monday and Tuesday were bullish with the S&P 500 (^GSPC) rising more than 1% while the badly lagging Russell 2000 (^RUT) ripped more than 2% on Monday alone after its 1% jet higher last Friday.

    Under the hood, divergences abound. The S&P 500 and Dow Industrials (^DJI) managed all-time closing highs on Wednesday while the Russell 2000 could not hold its 200-day simple moving average yesterday. Internally, NYSE breadth remains mediocre even at these levels

    In addition, economically sensitive sections of the market have also begun underperforming significantly. Most notably, the iShares Home Construction Index ETF (ITB), which traded up by as much as 7% during the first two months of the year, has fallen 12% since and now trades down 6% YTD.

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  • Market divergence: Dow hits new highs, but small caps still struggling

    Philip Pearlman at Breakout 2 yrs ago

    Everyone in the world is now focusing on the extreme equity market divergences. They cause a good bit of anxiety and appear striking to observers forever looking for patterns in the big scheme with which to make sense of the universe.

    First, there’s the difference in performance between the large caps and the small caps. The large cap Dow Jones Industrial Average is making new all-time highs while the small cap Russell 2000 closed below its 200 day moving average last Friday.

    Related: Small caps slammed! Tension builds on Wall Street

    Second, the number of NYSE stocks making new highs minus the number of NYSE stocks making new lows continues to look mediocre at best even as the Dow and S&P make all time highs.

    Something has to give one way or the other. Either small cap under-performance and the relatively poor market internals drag down large caps or the small caps battle back and play catch up.

    The million dollar questions go like this -

    Or -

  • Beats deal shows Apple has finally woken up to reality

    Philip Pearlman at Breakout 2 yrs ago

    Apple is just a consumer electronics company and has been so for quite a while now.

    Its days as a magical company are long over. The magic died two and a half years ago with Steve Jobs and now Apple is finally coming out of denial, acknowledging reality and giving itself the opportunity to move on to its next phase.

    This is long overdue.

    The height of the denial culminated some months ago in the over-the-top fantastical and widely distributed iPad commercial complete with dreamy Robin Williams voice over that, while excruciatingly beautiful, seemed way out of touch with reality and the accelerating trend towards the commoditization of the tablet market.

    Replay: Apple bounce coming, here’s your trading strategy

    So Apple, if the reports that it is close to buying Beats Electronics prove true, is finally pivoting; a long overdue move out of this denial and a coming to terms with what it is.

    Criticism of the Beat headphone quality might even be warranted, but fixing product flaws is simply much easier than creating a wholly new and adored brand.

  • Twitter needs to stay focused amid the darkening mood

    Philip Pearlman at Breakout 2 yrs ago

    I love Twitter.

    It’s a brilliant and revolutionary service that allows people from all over the world to connect with each other and to large audiences dynamically and in real time. In this way, it is a new communications technology that has truly changed the world for the better and I imagine it will continue to surprise and delight myself and millions of its other loyal users.

    But...

    Last night, Twitter (TWTR) released its second earnings report as a public company and the stock is trading much lower than yesterday’s close to around $38/share. This comes after an already precipitous slide from the $73.31 close on December 26th four months ago. Growth continues to slow and investors are questioning whether the platform can achieve near universal adoption the way Facebook (FB) has done it.

    High expectations accompany high valuations, and clearly Twitter is faltering presently.

    I hope they succeed.

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  • Does bloodletting in the 'fab five' momentum stocks spell doom for the broader market?

    Philip Pearlman at The Exchange 2 yrs ago

    Back in February, I wrote a piece called The Fab five stocks for 2014 and why they matter in which I focused on five of the strongest U.S. large-cap stocks: Google (GOOGL), Netflix (NFLX), Priceline (PCLN), Facebook (FB) and Tesla (TSLA).

    The gist was that these five stocks are the bellwethers for the bull market and must be watched closely in order to guage the health of the long-term rally in effect since the crisis lows of March 2009.

    On Feb. 13, I wrote:

    As these fabulous five names outperform, the bull market must be given the benefit of the doubt. If they falter, well, then watch out.

    And while they all rallied Tuesday, the once "fab five" stocks have indeed faltered in a big way over the past month:

    Where we are now

    So where now?

    That being the case, we're more likely in a sell the rips environment.

     

  • Nasdaq dives over 2% on jobs day; Dow makes new high before plummeting

    Philip Pearlman at Breakout 2 yrs ago

    We had carnage spread across the board to end the week in equities with technology names getting clubbed especially hard and the biotechnology sector continuing its slide. In fact the Nasdaq Biotech ETF (IBB) was down a whopping 5% at one point.

    The NASDAQ composite (^IXIC) traded almost 3% lower with Amazon.com (AMZN), Facebook (FB) and Netflix (NFLX) among others all down sharply. Recall that it’s been only two days since the S&P 500 (^GSPC) closed at a new all-time high, although things can shift quickly, especially to the downside and as the old saying goes, “the market takes the stairs up and the elevator down.”

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