Dow Jones Rebound Nearly Reaches 3,500 Points

Price volatility decided to call in sick as the Dow Jones Industrial Average traded quietly and virtually flat in stocks today. But weakness in some of the FANG stocks curbed investor enthusiasm for some tech shares. Correspondingly, the Nasdaq composite lagged on Friday with a mild loss of around 0.5%.


However, one could not say the same for numerous leaders in the fields of computers, enterprise software, tech services and telecom gear.

Younger companies with more robust growth than most of the tech bellwethers include Workday (WDAY) (172.77 buy point in a cup without handle), Five9 (FIVN) (48.22 entry in a cup with handle), Medpace (MEDP) (62.23 buy point), and Paycom Software (PAYC). These fast-growing companies have recently cleared a correct buy point or are forming a sturdy-looking base.

A base, if well formed, often ushers a strong breakout by a leading stock to new highs.

Breakouts tend to work more often when the current outlook for stocks is positive. Look for IBD’s current outlook to be in a “confirmed uptrend” before deploying your hard-earned capital. Also, read more about the importance of high industry group relative strength and the Industry Group Ranking in this new article in Investor’s Corner.

The largest market cap among the four stocks mentioned above is $40 billion for Workday, the HR management software innovator. Five9 and Medpace hold a market value of $2 billion to $3 billion.

Like Paycom, Fortinet (FTNT) and Palo Alto Networks (PANW) of IBD’s security software group are also forming bases.

Meanwhile, Ugg boot marketer Deckers Outdoor (DECK) staged a breakaway gap on good quarterly results. It powered past a 132.33 buy point in an eight-week double bottom.

Trying To Keep Up With Dow Jones

The S&P 500 bobbed lightly above and below the break-even line. With an hour to go, it fell about 0.2%. At the session high of 2716, the large-cap benchmark gained a mere 0.4%. However, the S&P 500 continues to see upward progress since it crossed back above the pivotal 50-day moving average less than three weeks ago.

The Russell 2000 also fell lightly, down 0.2%. The S&P SmallCap 600 lost less than 1 point, ensuring a weekly gain of more than 1%. At 933, the 600 now holds a robust year-to-date gain of 10.4%.

Volume was running sharply lower vs. the same time Thursday on both main exchanges.

The Dow Jones Industrial Average, at the session’s high of 25,193, has now climbed almost 3,500 points from its post-Christmas low of 21,712. It’s also trying to stay on the north side of its longer-term 200-day moving average while forging a sixth up week in a row.

The current stock market action was confirmed with a follow-through that took place in the first week of trading in 2019.

Read more about this IBD research-driven concept of studying the market itself to determine key turning points in the Jan. 4 Big Picture column.

Never Forget This Investing Rule

Meanwhile, keep in mind that the golden rule of investing still applies with the purchase of any stock.

That is, by keeping your losses at a reasonably small amount, you stand a great chance of recouping those inevitable losses in the next good trade.

As an example, Tencent Music Entertainment (TME) got slammed by sellers following days of wild intraday swings. The online music company, which had a brief stint on IBD Leaderboard, skidded more than 7% lower and hit a session low of 13.56. The sell-off sent shares in the new IPO more than 8% below a 14.85 buy point in a narrow IPO base.

In Other Financial Markets

Institutions bought back short-dated U.S. government debt and took profits on long-dated bonds. Such activity, following a better than expected net increase in U.S. payrolls for January, helped widen the spread in some parts of the yield curve.

The yield on 3-month T-bills sank 2 basis points to 2.39%, while the benchmark 10-year note saw a 6-point jump to 2.69%. That widened the spread between these two sets of government bonds to 30 basis points, up from 24 basis points on Jan. 2.

The PMI manufacturing index edged up to 53.9 in January vs. 53.2 in December. The very important ISM manufacturing index, meanwhile, reflected a re-acceleration in the nation’s factory activity. The index jumped to 56.6, well above the Econoday forecast of 54.

A reading above 50 denotes economic expansion.

The U.S. dollar continued to drift lower to $1.1461 vs. the euro, but it strengthened vs. the yen.

Meanwhile, Reuters reported that China bought U.S. soybeans a day after new trade talks concluded in Washington D.C. on Thursday. U.S. soybean futures hit a multi-month high on Friday.

Crude Oil Is Hot In 2019

Crude oil futures shot up nearly 3% as West Texas Intermediate prices hit a session high of $55.66 a barrel.

Oil has now climbed more than 22% since Jan. 1. In the Dow Jones Industrial average, California-based energy giant Chevron (CVX) rallied nearly 3% to 117.63 in active trading.

The stock is still forming a new base, so no proper entry point has emerged yet.

Watch to see if Chevron can retake its 200-day moving average, drawn in black in all daily charts at MarketSmith.

Chevron posted a 242% jump in adjusted earnings to $1.95 a share on a 13% revenue increase to $42.35 billion. Please read this IBD news story for more color on the quarterly results.

The stock’s RS Rating is still mediocre at 51 on a scale of 1 (wretched) to 99 (wonderful). A 51 RS Rating means Chevron has outperformed just 51% of all companies in the IBD database in terms of 12-month price gains.

Ranking above Chevron in the RS Rating, according to IBD Stock Checkup, include overseas giants Petrobras (PBR), Lukoil (LUKOY) and Gazprom (OGZPY).

Watch For These News Next Week

Next week’s stock market action will likely again be driven in large part by corporate earnings reports.

See the full earnings calendar here.

Please follow David Saito-Chung on Twitter at @IBD_DChung for more on growth stocks, bases, chart analysis, breakouts, sell rules and financial markets.


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Originally posted 2019-09-19 23:32:38.


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