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Netflix and Allergan Lead the Way

Internet and biotech stocks are trading as a cohort right now.
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All the bulls need is leadership. Netflix (NFLX) and Allergan (AGN) can provide that leadership.

First, we see many Internet companies going higher, and that's because Netflix blew the numbers away. What does Netflix have to do with these stocks? Quite simply, they trade as a cohort. They are all stocks with huge growth rates, of companies that spend like mad to take share of their markets. They are all companies that have opportunities that are too big to rein in spending.

In that sense, Yelp (YELP), Expedia (EXPE), Priceline (PCLN) and TripAdvisor (TRIP) can't be kept down if Netflix goes higher, because the shorts, who have been weighing on them, now fear upside surprises. These had seemed like risk-free annuities until today.

These stocks are also getting a boost from an unlikely corner: FireEye (FEYE). This Internet security company has been on a one-way ticket down from $96, a victim of overvaluation and then massive insider selling, including 14 million shares priced at $82.

This morning, shareholders of Mandiant, who got FireEye stock when FireEye acquired Mandiant in January, filed 13.3 million shares, and the stock is higher. I have been waiting for the insider selling to stop. But maybe the fact that insiders are selling at 50% below the peak is a sign that there could be a bargain afoot. I am adamant that the coming Airbnb, Dropbox and Box IPOs will hurt the group again, but it is an encouraging sign that FireEye isn't breaking down.

Finally, Allergan makes the shorts feel uncertain about going up endlessly against Celgene (CELG), Biogen Idec (BIIB), Regeneron (REGN) and Gilead (GILD), as well as Jazz Pharma (JAZZ) and Isis (JAZZ), which have also been free-fire zones for short-sellers.

If big pharma is taking action and waking up from its slumber and there's money being tossed around among Eli Lilly (LLY), GlaxoSmithKline (GSK), Novartis (NVS) and potentially Pfizer (PFE)-Astra Zeneca (AZN), then you can't be big short these stocks without worry anymore.

Now it doesn't hurt that once again we have earnings per share that show real sales growth: Halliburton (HAL), Netflix and today United Technologies (UTX). Nor does it hurt that analysts such as Morgan Stanley's software-as-a-service guy say it is time to buy the cloud group -- although Medidata (MDSO) sure made that call suspect.

Nor does it hurt that Credit Suisse pulled the trigger on an upgrade for Facebook (FB) the day before it reports. That's either gutsy or suicidal -- I don't know which ... yet.

Still, what matters is the end -- at least momentarily -- of the short tyranny that had mired super-high-growth stocks and left them like easily harpooned, beached-up whales.

Now, if we actually get some good numbers from these Internet companies that "look" like Netflix, and from the biotechs that "resemble" Allergan, then the rally can continue. 

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long CELG and FB.