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2019 Stock Market: Dow Leads Tuesday But Then Fades

U.S. stock indexes gapped up to a fast start Tuesday but couldn’t hold most of the gains. The stock market initially rose on news that U.S.-China trade talks were making progress.




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The blue-chip Dow Jones industrial average pegged a 0.5% gain in late morning action after being up more than 1%. Large caps as gauged in the S&P 500 gripped a 0.3% gain. The Nasdaq and small-cap Russell 2000 rose 0.3% and 0.5%, respectively.

President Trump tweeted that talks with China were “going very well.” Meanwhile, the South China Morning Post reported that China was buying more soybeans from the U.S.

Oil prices rose 2% on hopes of a China deal.

Early 2019 Stock Market Leaders

Through the first four trading days of 2019, the energy sector rose 6.3%, leading all 33 sectors. The retail sector added 4.1% and the bank sector added 3.6% to round out the leadership.

Four trading sessions do not make a trend, but market watchers will be looking for early signs of leadership.

Breakouts have been on the light side in recent sessions, but a few stocks have shown signs of life. Business software developer Atlassian (TEAM) cleared an 89.92 buy point in strong volume Monday. The stock is holding above the buy point.

Analysts expect Australia-based Atlassian to grow earnings 50% in fiscal 2019 ending in June.

The Innovator IBD Breakout Opportunities (BOUT) exchange traded fund rose 3.4% Friday, 3.4% Monday and held a small gain Tuesday morning. The fund is built around stocks clearing resistance levels.

Stocks showing constructive action in their consolidations include restaurant chain Wingstop (WING), 6% off its high in a cup base, and variety store chain Five Below (FIVE), about 7% under a 125.85 entry in a new base.

Look For Double-Bottom Bases

Double-bottom bases — a potentially bullish pattern with the shape of a W — have been showing up more frequently, sometimes with awkward shapes. Stocks working on double-bottom patterns include Trade Desk (TTD), Veeva Systems (VEEV), Allison Transmission (ALSN), Adobe (ADBE) and Netflix (NFLX).

Brazil bank Banco Santander (BSBR) is in the 5% buy zone after a Jan. 3 breakout from a cup-type base.

Another way to look for leadership is to measure a stock’s performance from the Christmas Eve close. This is where the indexes marked closing lows.

Oil stock Continental Resources (CLR) is up 27% since Christmas Eve. Retailer Ulta Beauty (ULTA) is up 18%. Upscale apparel retailer Lululemon Athletica (LULU) is up 20%. Morgan Stanley (MS) is up 12%.

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