It was a slippery slope in the markets on Tuesday, with equities breaking lower. By lunch the PowerShares QQQ ETF (NASDAQ:QQQ) was down by 1.5%, while the S&P 500 and Dow Jones carried losses of roughly 75 basis points. In light of that action though, we surely found some top stock trades to watch.
Top Stock Trades for Tomorrow #1: Allergan
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Just yesterday we highlighted the action in Celgene (NASDAQ:CELG) and Bristol-Myers Squibb (NYSE:BMY) as they tangle with a mega merger. Now it’s Allergan’s (NYSE:AGN) turn, which is being acquired by AbbVie (NYSE:ABBV).
Allergan is up 26.5% after agreeing to sell for $188.24 per share. The $63 billion deal comes in a cash and stock format, with AGN shareholders receiving $120.30 per share in cash and .866 shares of ABBV for each share of AGN they own.
So if the deal price came out to ~$188 per share, why is AGN only at $164 and retreating? Well, since the cash portion is only for ~$120 per share, the rest of the deal price depends on ABBV stock price.
With ABBV getting walloped on the day — more on that one in a second — it drags down the price of the deal. ABBV is currently down 15%, so that’s putting a bit of a damper on the deal.
We saw similar action after the CELG/BMY announcement, although until Monday they were both trading pretty well.
Some AGN investors may be frustrated with the deal price, given that less than a year ago AGN was above that mark. However, it’s a lot better than the floundering stock could muster on its own in 2019. Watch ABBV. If it recovers, so too should AGN.
Top Stock Trades for Tomorrow #2: AbbVie
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ABBV dropped over 15% and isn’t showing many signs of life. To say the chart looks ugly would be a compliment at this point.
AbbVie shares have been locked in a brutal downtrend over the past 18 months. Shares are down more than 40% after hitting a high north of $118 in January 2018. Stuck below its 10-week and 50-week moving averages, shares are losing the 200-week moving average now. It’s also below downtrend support (blue line).
Maybe $65 can buoy the name or perhaps buyers will decide to gobble up the stock after digesting the AGN deal in a bit more detail. But if buyers don’t step up, the next notable level of support may not come until $60 to $61.
A further decline will hurt ABBV shareholders, obviously, but it will hurt AGN owners too. On a rebound, watch the $70 to $72 area. ABBV needs to reclaim this zone to garner upside momentum.
Top Stock Trades for Tomorrow #3: Microsoft
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Microsoft (NASDAQ:MSFT) has been a beast. On Tuesday though, shares tumbled 3% at their lows as bulls take a breather.
The only question now is, how much of a break does MSFT need?
Share have been in a sharply rising channel for most of 2019, with the exception of a few trading sessions. Aggressive bulls may wait for a buying opportunity in the $127 to $130 range, while more conservative bullish traders may try waiting for a dip down to the $120 area.
That $120 fill may be hard to get without a larger correction. Even in late May when the markets were swooning, the stock only gave those looking for a $120 entry one day. And that was coming off a $131 high, not the $138.40 high it logged earlier this week.
Top Stock Trades for Tomorrow #4: FedEx
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FedEx (NYSE:FDX) will report earnings on Tuesday after the close and boy does the chart look unattractive.
The 10-week is currently squeezing this one lower, but its other trends aren’t doing FDX any favors. The stock has been putting in lower highs for 18 months, a trend that has accelerated over the last nine months.
FDX sports a double-bottom down near $150, which is the must-hold level after it reports. If it losses this mark, see that it reclaims it. It would preferably happen on the same day amid a big reversal, but by week’s end works too. Below $150 and FDX is in trouble.
On the upside, see if FedEx can reclaim its 10-week moving average and close above downtrend resistance (near $175). I don’t trade stocks ahead of earnings, but it’s possible FDX could pose post-earnings opportunities.
Top Stock Trades for Tomorrow #5: BlackBerry
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This one is also looking ugly. BlackBerry (NYSE:BB) will report earnings before the open on Wednesday, and like FDX, the trend hasn’t been kind.
Over the last few weeks, the 50-week and 200-week moving averages have worked together to stymie BlackBerry’s rally attempts. Now back below the 10-week and the stock’s recent lows near $7.70 are on the table.
On a rally, a close over $9.01 sets up a test of downtrend resistance. Over $9.60 could spring BlackBerry free.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long CELG.
