After a 26% jump, walk away from this stock: Traders – CNBC.com

After a 26% jump, walk away from this stock: Traders – CNBC.com

How to trade a skyrocketing stock

How do you trade jumping shares of Williams now? Todd Gordon discusses with Brian Sullivan.

Shares of Williams Cos. soared 26 percent on news that the energy company rejected a $64 per share takeover offer from Energy Transfer Equity.

In a statement, Williams said the proposal “significantly undervalues Williams.”

Williams further announced that it has retained Barclays and Lazard to help it review “strategic alternatives, which could include, among other things, a merger, a sale of Williams, or continuing to pursue the company’s existing operating and growth plan.”

However, some traders aren’t too optimistic that further upside is ahead for the stock, which closed Monday at $65.06.

“It seems clear that Energy Transfer Equity came in with a pretty nice bid for WMB,” David Seaburg, head of equity sales trading at Cowen, wrote to CNBC. “Maybe they bump it up some, but not much more. And I don’t think another buyer emerges.”

Seaburg recommends that anyone lucky enough to hold the long-stagnant stock sell.

“Reduce risk, because it’s an all-stock deal with little upside,” Seaburg said.

George Frey | Bloomberg | Getty Images

A Williams Companies natural gas drilling rig in Rifle, Colorado.

Technical analyst Todd Gordon of TradingAnalysis.com is similarly pessimistic.

“Of course the upside is in play, but technically, from a trading point of view, this is a very difficult story to trade, just because of the massive size of this gap,” he said Monday on CNBC’s “Trading Nation.”

“As a trader that’s trying to contain risk, this makes me nervous,” Gordon said.

Analysts, meanwhile, are sure to closely watch the company’s next moves.

In a note titled “Who’s Your Daddy This Time?” following the Father’s Day announcement, Jefferies analyst Christopher Sighinolfi wrote that he is awaiting “more information with respect to the timetable set for Williams to conclude its exploration of strategic alternatives.”

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After a 26% jump, walk away from this stock: Traders – CNBC.com

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