Almost everyday in the past two months there has been at least one or two stocks a day that are rumored to be takeover candidates. Ever since August 17th, 2010 when Potash Sask Inc. (NYSE:POT) received a takeover bid from BHP Billiton Ltd. (NYSE:BHP) for a huge premium the stock market has gone into a takeover mania. There are now tons of stocks that have these takeover premiums built into them.
Yesterday, the latest takeover rumor was Microsoft Corp. (NASDAQ:MSFT) looking at buying Adobe Systems Inc. (NASDAQ:ADBE). Adobe Systems was trading around $25.45 before the takeover chatter began. The stock traded as high as $30.00 intra-day before settling at $28.69 as of yesterday’s close This morning Adobe Systems is trading lower by $1.73 to $26.97. The reminds me of something out of the original movie Wall Street when Bud Fox told his buddies buy the fictional Teldar Paper and Blue Star Airlines. This crazy action seems to take place every single day.
Traders and investors cannot make a rational decision as there are now thousands of stocks that are getting takeover rumors and floating higher on this nonsense. Look at the technology sector for example. The NASDAQ has soared higher as stocks such as Netflix Inc. (NASDAQ:NFLX), Citrix Systems Inc. (NASDAQ:CTXS), Netapp Inc. (NASDAQ:NTAP), and dozens of others all have a takeover premium built in and are probably trading higher than they normally would be. The danger here for many investors is going to be when this mania stops. Should the stock market ever turn down and begin to sell off again many of these so called takeover stocks will decline very fast. Therefore, it is prudent to be a good technical trader at this time. Stocks should be bought and sold off the pattern that represents the emotions of human nature and not the nonsense of a quick buck being made on some takeover chatter.
Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
