Reaction to the Failure of the Rite Aid, Albertsons Deal Is Not Positive

 | Aug 09, 2018 | 11:37 AM EDT
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The indices are trading in a narrow range again but breadth is solid as it approaches 2 to 1 positive. There are some good pockets of momentum with names like Roku (ROKU) , Yelp (YELP) and Carvana (CVNA) making strong moves on good earnings.

The pockets of strength are keeping sentiment strong and when it becomes obvious that the bears can't take this market down, it sucks in some new opportunistic buyers. The thinking is that if the bears can't do better than this then we might as well buy them and try to make some money.

I'm stalking a number of buys, but of particular interest is GrafTech (EAF) that did a secondary offering today priced a $20. EAF is a supplier of graphite electrodes which are essential to the production of steel in electric ark furnaces. The company had a huge quarter with revenues growing nearly 300% and EPS of $0.67 versus a loss in the prior year. It is a cyclical business so it sells at a low P/E but the company is buying back a big chunk of this secondary which should provide good support.

One stock that is not acting well today is Rite Aid (RAD) . Rite Aid has had a merger agreement with Albertsons pending since February and that finally fell apart today.

There has been objection to the RAD merger since it was announced but the reaction to the failure of the deal definitely is not positive. RAD is suffering not only from concerns that Amazon (AMZN) is taking business but it has no growth and is barely breaking even.

In addition the RAD chart offers little hope. There may be some value buyers interested in it at some point but the market has given up on it and it is unlikely to see a recovery anytime soon. The RAD chart is not unlike General Electric (GE) . There just isn't any sign that it is going to recover soon. There are far better places for your precious capital.

(Amazon is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN? Learn more now.)

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