Apple Exits Proper Buy Zone; These 4 Sectors Lead Stock Market Rally

Apple showed why it continues to be a market leader, even among big-cap techs, while stocks today got a boost by a relatively broad array of industry groups and sectors Monday.


The Dow Jones industrial average led the other key indexes with a gain of 1.3%. The Dow industrials got help not only from Apple (AAPL), but also seven other components within the 30-stock average that rose at least 2 points. They included Caterpillar (CAT), JPMorgan Chase (JPM), Goldman Sachs (GS,) 3M (MMM) and UnitedHealth Group (UNH).

At 24,776, the blue-chip index is now back in the black, up 0.2%.

The Nasdaq composite trailed with a 0.9% advance. Yet at 7756, the tech-rich composite has stretched its year-to-date gain to more than 12.3%.

The S&P 500 also rallied almost 0.9%, while the S&P SmallCap 600 moved up 0.7%. Top industry groups of the day included construction and mining equipment, oil drilling, newspapers, automakers, air freight transport, air conditioning and heating products, and superregional banks. All seven of these industry groups ran up 2.6% or more.

A top 20-ranked group, U.S. oil and gas exploration and production, romped 2.3% higher. (See the entire list of 197 IBD industry groups ranked each day by going to “Stock Lists” on the main navigation bar of the home page, click on IBD Data Tables, then select “Industry Group Rankings.”)

Volume ran 6% higher vs. the same time Friday on the Nasdaq and increased by 16% on the NYSE. In other words, the indexes’ nice gains in stronger trading activity indicates institutions are anxiously scooping up shares. That’s bullish.

Apple, a big winner in 2017, has moved up in a milder yet still bullish fashion since the stock broke out on May 4.

The iPhone and digital services giant cleared a narrow double-bottom base that showed a 179.04 buy point. Since then, shares have gotten as high as 194.20, up 8.5% past the proper entry point.

When a stock breaks out, try to buy shares as close as possible to the breakout price, and no more than 5% past this proper entry.

You don’t want to buy shares too high in price ahead of a potential normal pullback.

How Much Apple Can Grow

While Wall Street’s consensus estimates for full-year fiscal 2018 earnings growth have been shaved a bit, they’re still robust.

Analysts think Apple will grow FY 2018 profit by 25% to $11.49 a share. The fiscal year ends in September. For the June-ended fiscal third quarter, the Street sees profit up 31% to $2.18 a share on a 15% rise in the top line to $52.29 billion. That bottom-line estimate tops the megacap tech’s past results over nearly three years.

Earnings fell for three quarters in a row through fiscal Q4 in 2016, then rebounded 2%, 11%, 18%, 24%, 16% and 30% in the past six quarters. Accelerating revenue growth has been one positive factor.

Fiscal Q4 profit is seen rising 28% to $2.65 a share.

On IBD Stock Checkup, Apple scores an 87 Composite Rating on a scale of 1 to 99. For a company that logged $229.2 billion in sales for FY 2017 and is the largest company in the U.S. financial markets with a $936 billion market value, such a rating is not shabby at all.

However, all of the leaders making the IBD Big Cap 20 screen show Composite scores of 94 to 99. The Composite Rating combines fundamental, technical, and institutional sponsorship characteristics of all stocks in IBD’s database.

In general, focus on those with a 90 or higher. But turnaround situations will generally score much lower, just like Apple did when it broke out of a first-stage cup with handle at 118.12 on Jan. 6, 2017.

4 Hot Sectors In Stocks Today

On Wall Street, oil and gas, retail, and financial stocks helped the cause.

Transportation issues also did very well; the Dow Jones transportation average roared more than 2% higher on the strength of railroad and trucking firms.

SVB Financial (SIVB), the Silicon Valley-based lender, gained 3% to 304.39. Watch to see if the stock retakes its key 50-day moving average.

The member of IBD’s superregional bank industry group broke out on April 27, gapping out of a nearly seven-week cup without handle. The proper buy point was 271.89.

Please read this Investor’s Corner on how to handle such powerful moves up in price. IBD calls them “breakaway gaps.”

Elsewhere in stocks today:

Baozun (BZUN) showed that institutions are not deserting the China consumer-spending theme. The e-commerce specialist rallied more than 4% to 57.83 in below-average trade.

As seen in a daily chart, fund managers have shored up support for the stock during challenges of the 50-day moving average.

Baozun is a member of IBD’s most stringent computer-run growth stock screen, Sector Leaders.

Oil Explorers Rally

Anadarko Petroleum (APC) rose nearly 2% to 74.93 in vigorous turnover. The oil and gas exploration giant has lurched out of a massive cup with handle that gives a 72.80 buy point.

The stock is still in the 5% permissible buy zone.

The Street sees Anadarko earning $2.81 a share this year, halting three years of bleeding red ink. In 2019, earnings are seen rising 21% to $3.41 a share.

Cactus (WHD), subject of the “IBD Stock Analysis” feature in the latest IBD Weekly print edition, showed a wild swing as shares rallied more than 4% to 35.49 in heavy turnover. The stock dropped hard after hours, though, after the company announced a plan to sell 10 million common shares. It currently has 74 million shares outstanding.

It had been building a cuplike base and on Monday the stock reached a session high of 37.38.

The Houston-based firm specializes in wellheads and pressure control gear for the oil and gas industry.

On the downside, Twitter (TWTR) fell more than 4% but bounced off its highs. The social media giant, which purged millions of fake accounts, still has a marvelous advance of 29% after it broke out of a cup with handle and a 33.88 buy point.

Across The Pond

Negotiations between Great Britain and the rest of the European Union on a smooth Brexit appeared to run into fresh trouble following reports that Boris Johnson is resigning as the U.K. foreign secretary. However, U.K.-based companies didn’t suffer on Wall Street.

U.K.-based Atlassian (TEAM), the fast-growing project management and team collaboration software firm, surrendered early gains to fall 0.7% to 64.78 in very light turnover.

The stock, part of the No. 1 software sector within IBD’s research tables, has been finding buying support at the 50-day moving average in recent weeks. Shares are up 42% year-to-date and are still in buy range after clearing a 62.88 entry in an eight-week cup with handle.

Sometimes, the highest price in a handle will slightly exceed the highest price on the cup’s left side.

Atlassian gets a strong 92 Relative Price Strength Rating from IBD Stock Checkup. This means the stock is outperforming 92% of all public companies in IBD’s database over the past 12 months. Atlassian’s Composite Rating is even brighter, at 98.

Sky (SKYAY) — the broadband, phone and pay-TV broadcasting titan — rallied more than 2% to 78.93 in heavy volume. The stock is very thinly traded as part of the over-the-counter exchange.

Meanwhile, some market observers are showing more concern about the increased fragility of diplomatic relations between the U.S. and its staunchest European allies.

Growing Economic Risk

Joe Quinlan, head of market and thematic strategy at Bank of America and U.S. Trust’s wealth management operations, has been eyeing “a growing gulf that divides the United States and Europe” that could translate into weakening economic activity between the two powerhouse regions.

“The animosity generated by threats of U.S. trade protectionism, and other major policy differences, has not only undermined any goodwill between Washington and most of Europe,” Quinlan wrote in a recent note to clients. “It’s also eroded decades-long trust between the United States and Europe, and called into question an economic partnership that has been at the bedrock of the global economy for the past 70 years.”

Underscoring the extreme importance of trade between the U.S. and Europe, Quinlan notes that roughly $5.5 trillion in foreign affiliate sales and $1.4 trillion in total trade of goods and services in 2017 are the highest in the world.

(Please follow Saito-Chung on Twitter at @IBD_DChung for more commentary and analysis of growth stocks, charts, buy points, and financial markets.)


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Originally posted 2019-09-19 23:16:40.


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