Apple, Diamondback Energy Breakouts Show Why Volume Key | Stock News & Stock Market Analysis

Futures for the S&P 500 index were little changed late Wednesday. The major averages edged lower during the regular session. Diamondback Energy (FANG) cleared a buy point in double-normal volume. Meanwhile, Apple (AAPL) has pulled back since edging past an entry in so-so trade. Fellow Dow industrial components Microsoft (MSFT), Walt Disney (DIS) and Pfizer (PFE) have retreated back into their bases after getting an inflated boost

X Volume is sometimes overlooked by investors. But it’s a key indicator of institutional support. It’s good to see volume rising at least 40%-50% above normal on a breakout. Low-volume breakouts can succeed, but the odds are much lower.

S&P 500 index futures edged higher vs. fair value. Dow futures rose 0.1%. Nasdaq 100 futures fell a fraction.

Diamondback Energy

Diamondback Energy rose 4.9% to 117.24 in Wednesday’s stock market trading, blasting above a 115.03 flat-base buy point. Volume was 110% above the 50-day moving average, and really picked up in the afternoon.

There’s no guarantee that Diamondback’s move will succeed. Several recent Diamondback breakouts failed or went nowhere. But the strong volume is positive. And there are reasons to be encouraged beyond the price-and-volume action.

The shale operator has five straight quarters of strong earnings growth. Analysts predict a 56% EPS gain in the current quarter. Crude futures at two-year highs also bodes well going forward.

Oil and gas groups dominated IBD’s top-performing industries on Wednesday, with mining and steel also faring well. Shale and other energy plays dominated the S&P 500’s biggest winners.

Several energy stocks are closing in on buy points. That includes fellow shale plays Concho Resources (CXO) and EOG Resources (EOG), as well as oil majors such as Chevron (CVX), ConocoPhillips (COP), BP (BP) and Royal Dutch Shell (RDSA).

Diamondback was added to IBD’s Leaderboard on Wednesday.


Apple rose 1.4% to 176.34 on Monday, just nudging past a 176.24 base-on-base entry. But volume was just 8% above normal. A Nomura downgrade pushed the iPhone maker below its entry on Tuesday, with Apple nudging down 0.1% on Wednesday to 174.35.

If Apple retakes that 176.34 entry in bullish trade, the chart would look a lot more inviting.

Bewitched Breakouts

Microsoft, Pfizer and Disney are exceptions that prove the rule on volume’s importance. They all moved into buy range on Friday in powerful volume. But last Friday was a triple-witching expiration day, pushing up market volume sharply. On those days, gains in heavy volume aren’t necessarily a sign of conviction buys by mutual funds and other big institutions.

The three Dow components certainly haven’t followed through this week. Microsoft has retreated 1.5% to 85.52, back below the 86.30 flat-base entry. Disney lost 1.9% on Wednesday to 109.69, dropping under its 110.93 buy point in a somewhat messy double-bottom base. Pfizer has skidded 2% this week to 36.46, undercutting its 36.88 entry.


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Originally posted 2017-12-20 23:54:25.


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