Dow Jones Lags Nasdaq; 4 Blue Chips Outpace Apple

The Dow Jones industrial average lagged other key indexes during relatively calm action in stocks today. Burdened in part by a more than three-point drop in Home Depot (HD) shares, the Dow Jones edged lower during the entire morning on Wall Street, but reversed to trade flat in the afternoon.




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The S&P 500 and the Nasdaq both posted mild gains of around 0.3%, keeping a solid January advance intact. On Jan. 4, IBD noted a key change in the current outlook for stocks. In that session, the 500 issued a pivotal follow-through rally. Read more in the Jan. 4 Big Picture column.

Every major market bottom since the early 1900s featured a follow-through.

Meanwhile, leading techs are emerging.

Fiber optic equipment specialist Ciena (CIEN), which joined IBD Leaderboard on Nov. 5 as a half-sized position, is poised to rise for a fourth straight week. Shares jumped nearly 2% and hit a new high of 38.48, up nearly 19% past a 32.43 correct buy point. Data management firm Attunity (ATTU), highlighted in a Wednesday Stock Spotlight column, rushed more than 4% higher and eclipsed the 25 price level.

Shares are breaking out past a 23.95 buy point in a cup without handle base. Volume has already pushed past 1 million shares. Attunity normally trades 325,000 shares a day.

Despite the mild moves, breadth in the overall market improved. Winning issues led losing ones by a roughly 7-5 margin on the NYSE. On the Nasdaq, advancers beat losers by more than 4 to 3.

These Dow Jones Components Are Outperforming Apple

Apple (AAPL) is still trying to find a bottom after correcting more than 39% and is still down for the year. Notice how the Relative Strength Rating in the iPhone, MacBook and digital services giant continues to fall. According to IBD Stock Checkup, Apple currently shows an RS Rating of 20 on a scale of 1 to 99.

This means Apple is now outperforming just 20% of all stocks in the IBD database over the past 12 months. The megacap tech still holds a much more modest gain since it initially broke out of a very good cup with handle on Jan. 6, 2017. The proper entry point back then was 118.12.

4 Leading Blue Chips Forming Bases

Meanwhile, Merck (MRK) and at least 10 other components of the Dow Jones industrial average hold an RS Rating of 80 or higher. Merck shows the best with a 93 rating.

Notice on a weekly chart how the Big Pharma giant, a huge winner during the 1990s bull run, has been miserly in its recent correction after a healthy run-up in the second half of 2018. In late July, Merck broke out of a saucer with handle at 63.06 that’s nearly the size of an aircraft carrier. Shares rallied 27% from that proper buy point, justifying the use of IBD’s key sell rule for taking profits on the way up.

3 More Dow Jones Stocks Forming New Bases

Since hitting a new multiyear high of 80.19, Merck has been forming a new base that so far has the length and depth appropriate for a flat base.

McDonald’s (MCD), Boeing (BA) and Visa (V) are also acting well. They each show good RS Ratings of 80 or higher and have shown relatively mild declines from their 52-week peaks.

Visa trades just 9% below its 151.56 peak. In its current base, the credit card and debit card transaction processing giant showed a correction of just under 20%. December-quarter earnings are seen rising 16% to $1.25 a share. That would mark a slowdown from EPS increases of 26%, 29%, 40% and 34% in the prior four quarters.

Elsewhere, Okta (OKTA) is clearing a wide-and-loose cup base with a 75.59 buy point. The security software firm is expected to post net losses in both 2018 and 2019. But in the third quarter of 2018, Okta stretched a long run of excellent revenue gains with a 58% jump to $105.6 million.

Banks Are Still Ahead Of The Dow Jones And Other Major Indexes

On the downside, Morgan Stanley (MS) gapped sharply lower and fell back below its downward-sloping 50-day moving average.

The wealth manager and investment bank reported a shocking 13% drop in fourth-quarter earnings to 73 cents a share, ending a respectable nine-quarter streak of year-over-year EPS gains. Revenue expanded just 5% to $11.67 billion, the smallest increase since the firm’s top line contracted 7% in the second quarter of 2016.

However, money center banks have continued to shine in January so far. IBD’s Banks-Money Center industry group is up nearly 11% since Jan. 1 despite the Morgan Stanley sell-off.

Please follow Chung on Twitter at @IBD_DChung for more on growth stocks and breakouts.

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