With the Greek default crisis in focus and the Federal Reserve cutting its forecast for GDP this year, a rate hike is still some time off, which makes now the perfect time for some dream mergers.
The Street's Jim Cramer recently shared his insight on some of the best potential takeover targets, and we're taking his lead and looking at how his picks stack up from a technical analysis standpoint. To aid us in this effort, we asked some of our fellow Real Money contributors to provide some technical insight.
Twitter (TWTR) is Cramer's "ultimate mea culpa" stock of the year and a holding in his charitable trust portfolio Action Alerts PLUS. The stock could continue to spiral downwards unless there's some aggressive action, like a takeover. So who's got the gumption to acquire Twitter? Cramer likes Google (GOOGL), another AAP holding.
Google's stock can't seem to get out of its own way, Cramer told his viewers on CNBC's "Mad Money." It's been basically flat since December 2013 but the tech giant could go up huge if it bought Twitter at a 20% to 25% premium, Cramer noted. Google would have the power to fire everyone and integrate Twitter's technology and user base into its robust engineering and sales operations. Cramer said this takeover could push Google to $700 a share.
Real Money contributor Rob Moreno took a look at these charts to give us the technical take on these takeover targets. Click on the charts to see what he had to say.
Yahoo! (YHOO) is another target ripe for the picking. Absent its investments in Yahoo! Japan and Alibaba (BABA), the company is valued at less than zero. If Verizon (VZ) would just buy Yahoo! at $50 a share it would get its money back almost instantly while also becoming a real player on the Web, Cramer said. And here's what Moreno saw in the charts:
Cramer also said he wants to see Qualcomm (QCOM) buy Skyworks Solutions (SWKS), the best cellphone component maker on Earth. And why can't Coca-Cola (KO) buy Monster Beverage (MNST), which now uses Coke's distribution system? Both stocks would go higher, Cramer noted.
"Qualcomm's chart shows a very defined range, with the stock at the lower end of the box now and trying to bounce back," Lang points out. "QCOM is clearly challenged. The Moving Average Convergence Divergence sell signal from early June is still on, and Relative Strength is weakening with a very steep slope. While we could see the price get back toward the upper end at $70.5 eventually, it's going to take some effort," Lang concluded.
"Skyworks Solutions is a beautifully up trending chart in one of the hottest sectors in the market. What we like to see in a chart is one that goes from the left corner to the right corner, and I have drawn the trend lines to show where we are within the trending process. As you can see SWKS has enough power and strength to reach up to the upper trend line making for a nice profitable trade. In addition, the MACD has been stair stepping up for days which is the precursor to the kiss and cross of the actual MACD lines. When black crosses red the chart goes on an official buy signal. Finally, we take a look at the stochastics which have made a higher low and are going sideways to up. Stochastics measure the velocity of the price movement of a stock and often signals a turn in price before the stock actually makes a turn," Smith wrote.
"Coca-Cola's chart shows the stock may have bottomed in the high $30's once again (prior levels of support), but there is a bunch of work ahead before it gets green light. The resistance is ahead at $40.75 and then the 200-day Moving Average at $41.16. A 2.5% move gets you there, but that is huge for this company. An imminent buy signal is coming on the MACD and the %R shows a continuation move may occur. There is some good recent option flow here as well, which is very notable," Lang said.
"Monster Beverage spent many months in consolidation before breaking out to the downside. It capitulated on May 11, but continued to fall on very low volume while the rest of the chart caught up with the price action. Notice how the MACD indicator slowly started stair stepping up even while price was falling until five days ago when the stochastic went overbought and the MACD lines crossed putting the chart on a buy signal. Since then the upside price action has been confirmed and the stock has gained $3.40 or 2.64% on the week. It has overhead resistance at the 50-day MA and is currently being capped at the 20-week moving average. The weekly is very oversold and just now going into a stochastic buy signal giving confidence that the price movement, over time, can make it through the 50-day MA and go on to new highs," Smith wrote.
Under Armour (UA) CEO Kevin Plank just solidified control with a new class of stock. Cramer asks, why not pay a 24% premium for Lululemon (LULU) and get it for exactly where it was trading two years ago?
Real Money contributor Gary Morrow took a look at these charts:
"UA continues to drift higher following its June 5 breakout of about 4.9%. It will need a volume boost though to reach the April spike high of $88.00 for a major retest. A Key support zone is in place near the May peak of $79.70 and 50-day Moving Average at $80.40. A high short interest ratio (7.2) may keep pullbacks to a minimum," Morrow wrote.
"LULU continues to consolidate following its more that 11% surge on June 9. As pressure remains on the bears (SIR 8.8) a retest of the 2015 highs at $70.00 appears likely. Upside trade, which has been very light of late, will need to pick up in a big way if a retest is ahead. Support is nearby at the May peak of $66.00. A much more substantial support zone lies in the $64.50 to $63.75 area. This includes LULU's June 9 breakout gap," Morrow noted.
Kellogg (K) needs to buy both major organic food players WhiteWave Foods (WWAV) and Hain Celestial (HAIN) -- yes, both, Cramer continued. The move could help Kellogg become the fastest-growing packaged-food company out there, he said.
"Kellogg remains in a downtrend but is working on a short term bottom. Solid support is in place near the March and early June lows around $61.50 to $61.00. Heavy overhead moving average (declining 50-day and 200-day MA) pressure will likely contain a rebound until a more solid base is in place. A close below $60.00 would be a clear warning sign," Morrow said.
"HAIN extends Tuesday's powerful bull flag with a breakout, trading just shy of heavy resistance near its all time highs of $66.35. Key support is in place near May and the initial June highs at $63.50. A close back below the June low of $61.00 would be very damaging. HAIN has a high short interest ratio of 8.0, which should give it extra juice as it pushes higher," Morrow added.
And for just $12 billion, Apple (AAPL), another AAP holding, could buy Harman (HAR) for a 50% premium and it could own the connected car, which is almost as good as owning the connected home, Cramer said.
Real Money contributor Dan Fitzpatrick took a look at these charts.
"Apple's daily chart shows a stock that, while in a multi-year uptrend, is going nowhere right now. The stock has been trading in a well-defined range despite three attempted breakouts above $135. The MACD indicator shows a reading that is below the midline (bearish). That has not been much above the zero line since March, when the last advance ended. I'd rather buy this stock at $135 than $125. If AAPL breaks out and closes above $135, at least I'll feel good about owning a stock that is hitting new highs rather than mired within a frustrating sideways trading channel," Fitzpatrick wrote.
"Harman International (HAR) broke out of a high base in late April when it fell from $140 down to $120. But after that bearish gap, the stock immediately rebounded and has been consolidating since then. You can see the high-volume selloff on April 30 that fell below $120 and then immediately stabilized at $130. Since that time, we've seen a gradual downtrend with the MACD indicator remaining below the midline and signaling a downtrend. But you'll notice that the 200-day MA is now sitting at the bottom of the trading range, which is where many traders like to buy. They'll wait for a stock to hit that long-term moving average before pulling the trigger. If you want to own the stock, use this pullback as an opportunity to buy, with a stop just below the 200-day moving average," Fitzpatrick noted.
Finally, why can't Johnson & Johnson (JNJ) buy Bristol-Myers (BMY)? Cramer said. JNJ has so many good franchises and could just fire everyone other than the scientists working on BMY's fantastic cancer franchise, Cramer added.
"The weekly chart of JNJ shows a stock that's in the process of either consolidating in a high continuation base before moving higher or forming a top that's about to lead to a selloff. But we don't need to be guessing here. The chart gives us a clear action plan. I've drawn a trend line along the resistance levels of an uptrending channel that extended back into 2013. Often, the first sign of the end of an uptrend is not a break of support. Rather, it's the failure to confirm resistance by printing a high that, while it might be higher than the last, does not quite reach the established resistance line. That's what happened in this chart where the stock printed a couple of highs at $110 but was unable to move higher. So we are left with a sideways channel with support in the high $90's -- just slightly below $100, which is worrisome. I see two things wrong with this stock. First, the stock is not bouncing off $100-- an obvious price that should contain limit buy orders. Instead, the stock is spending time below that level, almost as if there is selling pressure at $100. Not a good sign. Second, the Bollinger Bands are squeezing pretty tightly, and that condition typically precedes a bit move one way or the other. Given the sub-$100 trading range, I'm concerned that the next move will be lower. Last, the stock is churning below the 40-week (200-day) moving average. I don't like to see that. I like to see it trading above the 40-week moving average because that would reflect buying interest. So I think JNJ is a bit risky here. I'd suggest waiting until the stock trades back above the 40-week moving average before buying," Fitzpatrick noted.
"The first thing that jumps out at me is the big red volume spike on May 29. The stock sold off and broke down below the 50-day moving average on that day. During that session, the stock traded more than four times average daily volume. Further, the close was below the 50-day moving average. That's not what you like to see because many big funds wait for pullbacks to the 50-day moving average before buying. So it's encouraging that the stock has not continued lower and instead is drifting along that moving average. What's not encouraging is that the stock has shown absolutely no rebound from that big selloff. Instead, the sideways drift continues. The company is due to report earnings at the end of July, but I'm not sure that the stock will hold up until then. If you're long, try keeping a stop just below $64. If the stock falls back below that level, just stand aside and let others take the loss," Fitzpatrick concluded.
All these deals would produce instant spikes in prices for the acquirers right now, just as we've seen with every takeover announcement so far in 2015. That's Cramer's takeaway, and coupled with the technical take, you should be ready for the next wave of consolidation.