'Fast Money' Recap: How Alibaba Is Hitting Momentum Stocks

NEW YORK (TheStreet) -- The Dow Jones Industrial Average posted a gain on Monday, closing higher by 0.26%. However, the Nasdaq slid 1.07%. 

On CNBC's "Fast Money" TV show, Guy Adami, managing director of stockmonster.com, noted the iShares Russell 2000 ETF (IWM) fell lower than the Nasdaq, down 1.15%. He said the exchange-traded fund is likely headed to $108.

Tim Seymour, managing partner of Triogem Asset Management, said emerging market equities have also been selling off more than U.S. equities, down roughly 5% since the beginning of September. Momentum and growth stocks are the ones currently selling off in the U.S., he said. 

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Dan Nathan, co-founder and editor of riskreversal.com, reasoned that growth and momentum stocks such as Tesla Motors (TSLA) , which fell 9%, are seeing selling pressure because investors are freeing up cash for the upcoming Alibaba initial public offering. 

Adami said the stocks sold because of Alibaba seem likely to rebound in the days after the IPO. However, he said Tesla could decline to $225. 

Karen Finerman, president of Metropolitan Capital Advisors, said it would make more sense for stocks like Amazon (AMZN) or eBay (EBAY) to sell off because of the Alibaba IPO, not Twitter (TWTR) .

Robyn Karnauskas, biotech analyst at Deutsche Bank, said biotech stocks are "still the place to be" for investors. The industry offers 300% more growth than the S&P 500, but only trades at a slight premium to the index. She continues to like large-cap biotech stocks such as Gilead Sciences (GILD) , Celgene (CELG) and Regeneron (REGN) . One small-cap name she likes is Achillion Pharmaceuticals (ACHN) . 

Adami is a buyer of Celgene but said Gilead and Regeneron are not expensive stocks either, based on valuation. 

Finerman, who is long the iShares Nasdaq Biotechnology ETF (IBB) and the SPDR Biotech ETF (XBI) , said it has been a volatile ride, despite owning ETFs, which diversifies holdings across a number of different stocks. 

Seymour said investors seem better off owning spirits companies like Brown Forman (BF.B) , Diageo (DEO)  and Remy Cointreau (REMYF)  instead of beer companies.

Read More: Here's Why You Should Ignore the Naysayers on Alibaba’s Coming IPO

Adami called shares of Darden Restaurants (DRI) "absolutely buyable." The stock has a 10% short interest, 5% dividend yield and support near $45. Finerman added that "there's a lot of opportunity" in shares of Darden Restaurants. She is also a buyer.

Brian Blair, an analyst at Rosenblatt Securities, said Apple (AAPL) could sell roughly five million to seven million phones in the opening weekend. Investors and analysts have to be careful about being too optimistic because the iPhone 6 Plus will only be available in limited quantities, he said. 

However, the December quarter could much, much stronger. The phone will be available in 100 different countries and investors could see the company sell over 70 million devices, much is higher than the current expectation for 50 million to 55 million. The larger iPhone will likely cannibalize some of the iPad Mini sales, but the iPhone has a higher average selling price. The company will also likely introduce a larger iPad next year, Blair concluded. 

Seymour suggested that Apple has room to the upside. Adami said Friday will become a "sell the news" event, which is when the phone is released. Shares of Apple could decline to $88. Nathan agreed and is a buyer of Apple near $90. 

Finerman said investors who are still long Apple but want to hedge their position can consider selling out-the-money call options that expire in roughly one month.

Dennis Gartman, editor and publisher of The Gartman Letter, said he was a seller of WTI and brent crude oil last week but has changed his tone after the commodity failed to trade lower following bearish news from the weekend. He suggested that investors buy WTI crude oil and sell brent crude oil as part of the trade. He also sold his long position in Alcoa (AA)  after the stock price bearishly reversed last Thursday. 

Seymour said there should be continued pressure on the refinery stocks. He is short Tesoro (TSO) and thinks the stock looks likely to move lower. 

Microsoft (MSFT) fell 1% and was the first stock on the show's "Pops & Drops" segment. Adami said investors can stay long the stock so long as shares stay above $45. 

North American Drillers (NADL) dropped 4%. Finerman said she is long the stock and continues to like the name. However, the share price may be volatile until there is more clarity on its deal with Russian integrated oil company Rosneft. 

Nokia (NOK) popped 2%. Seymour said the "stock has some room to run." 

Salesforce.com (CRM) declined 3%. Nathan said he would be a buyer of the stock near $55. 

Nicholas Colas, chief market strategist at ConvergEx Group, said large IPOs do not happen near market bottoms, they tend to happen near market tops. Investor demand needs to be strong in order for a large-sized deal to go off smoothly. The company operates in a good market and has great fundamentals, he concluded. 

Nathan said investors who are long Yahoo! (YHOO) and are still looking for upside can consider selling the November $50 call options as a partial hedge on their position. Adami said investors who have been long Yahoo! should consider taking profits. Finerman suggested taking profits in Softbank (SFTBY) . 

Seymour said investors who want to be long Chinese equities should buy Baidu (BIDU) , Tencent (TCEHY)  and Alibaba.

Nathan pointed out the bullish options activity in shares of JetBlue Airways (JBLU) , specifically in the December $14 call options. Adami and Seymour are both buyers of the stock. 

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For their final trades, Seymour is a buyer of Barrick Gold (ABX) with a price target of $18.25 and Finerman is a buyer Children's Place Retail Stores (PLCE) . Adami is a buyer of Darden Restaurants and Nathan said to buy Twitter in the low- to mid-$40's. 


-- Written by Bret Kenwell in Petoskey, Mich.

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Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter.

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