Growth Stocks Smash Dow Jones; Buffett Stock Plunges

Top-rated growth stocks in the financial services, digital advertising and telecom sectors staged gains that triumphed over a roughly 0.5% lift by the Dow Jones Industrial Average, including Dow Jones component Visa (V). The credit card and debit card transactions giant rallied more than 1% and moved past a 145.82 buy point in a cup-style base that features elements of a double bottom.


Stocks today wobbled a bit in the final 75 minutes of trading on remarks by President Trump on the status of trade talks with his China counterpart Xi Jinping. Bloomberg reported  that negotiators on both sides plan to extend talks into the weekend. The Nasdaq composite, up as much as 0.9% in the early going, cut its gain to around 0.6%.

At around 3:25 p.m. ET, the S&P 500 rose nearly 0.5%. But the Russell 2000 gained more than 0.7%, indicating growing confidence in the U.S. economy and the prospects for further earnings growth.

Volume was running sharply higher vs. the same time Thursday on the Nasdaq and a touch lower on the NYSE.

This Dow Jones Component Is Still A Leader In The Financial Sector

Visa’s credit card processing industry group ranks a decent No. 52 out of 197 IBD industry groups, according to IBD Stock Checkup. Visa earns a smart 95 Composite Rating on a scale of 1 (awful) to 99 (awesome). The Composite Rating analyzes the quality of a stock on three major fronts: fundamental strength, stock price action vs. the S&P 500 and the rest of IBD’s stock database, and quarterly institutional sponsorship.

The 5% buy zone in Visa extends up to 153.11.

In a proper double bottom, the base should feature two major sell-offs with an interim rally in between the two lows. Plus, the second low should undercut the first low, even if it’s just by a penny.

In Visa’s case, the stock sold off from a peak of 151.56 and hit a first low of 129.54 before rebounding sharply to 145.72 in early December. However, shares failed to rebound all the way back to the old high. Instead, they sold off again, hitting a new low of 121.60, easily taking out the first low of 129.54.

That second shakeout is vital to the future success of the chart pattern. Why? It signifies a real shakeout of disgruntled or uncommitted holders, sending those shares into the hands of portfolio managers with stronger conviction.

Analysts forecast Visa to grow earnings 15% to $5.31 a share in fiscal 2019, ending in September this year, and another 16% in FY 2020.

Top Growth Stocks Crushing The Dow Jones Return

Meanwhile, Trade Desk (TTD), Acacia Communications (ACIA), Workday (WDAY) and Xilinx (XLNX) continued to flex market leadership. All four have broken out and staged impressive gains from their respective buy points.

Trade Desk, which initially cleared a 149.10 buy point in a long double-bottom base on Feb. 4, blasted more than 30% higher in monster volume on outstanding Q4 results. It joined IBD Leaderboard again, this time as a new half-size position, on the strong move.

More Tech Stocks Break Out, Expand Gains

Acacia Communications also staged excellent gains on a dramatic turnaround in its fourth-quarter results (EPS up 52%, revenue 24% vs. year-ago levels). For more details on finding the correct buy point, please go to this IBD New Highs column.

Workday, one of the leaders in cloud-based enterprise software for HR functions and now financial and accounting operations, built a four-month base on base that showed a 172.77 buy point.

The stock cleared that buy point on Jan. 23, pulled back mildly for several days, then bolted higher as the budding stock market uptrend, confirmed with a Jan. 4 follow-through, gained more strength.

Workday shares, hitting a new high of 194.72, have now advanced 12.7% past the proper entry. Workday is also up 22% since Jan. 1. The Dow Jones Industrial Average has climbed 11.3% over the same time frame.

This Warren Buffett Stock Slides Deeper Below Its Highs

On the down side, Kraft Heinz (KHC) gapped down at the open and plunged more than 26% to an all-time low. At 34, the packaged food giant is now well below its October 2012 debut when it finished that month at 37.61.

The owner of many long-standing brands in cheese, coffee, pickles,  nuts and other popular food brands reported an SEC probe of its accounting practices. Warren Buffett’s Berkshire Hathaway (BRKA),  the largest holder of Kraft Heinz shares, fell nearly 2%.

Kraft Heinz reported a disappointing 7% drop in Q4 profit to 84 cents a share, 9 cents below the consensus view, as sales gained 1% to $6.89 billion. The company also recorded non-cash asset impairment charges of $15.4 billion to lower the carrying amount of goodwill in certain units, namely US Refrigerated and Canada Retail.

The Right Time To Sell Kraft Heinz

Kraft Heinz long showed poor stock action for months.

The right time to exit the stock came in June 2017, when Kraft Heinz failed to complete a nearly four-month flat base that showed a 97.87 buy point. The stock did not break out. Instead, shares slid below both the key 10-week and 40-week moving averages. For more on how to use this defensive sell signal in a timely fashion, please check out this Investor’s Corner column.

By late July the same year, Kraft Heinz’s 10-week line was tilting lower. The stock made multiple rebound attempts, but failed to rise back above the key support-and-resistance chart indicator.

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


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