Nasdaq, FAANG Stocks Stretch Gains As Oil Explorers Build New Bases

Restaurant stocks posted the biggest gains among all 197 industry groups on Thursday, rising roughly 5% as a group. FAANG stocks also boosted the market’s broad rally. Volume jumped on both exchanges, according to early data.


After hours, Intel (INTC) and (AMZN) both rallied more than 5% following quarterly results, while Microsoft (MSFT) fell around 1%. Meanwhile, oil and gas companies are vying for market leadership amid strong crude oil prices. Watch for new bases to potentially complete and offer proper new buy points.

The Nasdaq composite faded in the final hour of trading but still finished up 1.6%, outpacing gains of around 1% for the S&P 500 and the Dow Jones industrial average.

At 7118, the Nasdaq composite is down mildly for the week but has now moved up 3.1% year to date. It advanced 28.2% last year. The S&P SmallCap 600 underperformed, rising just 0.4%. The Russell 2000 gained 0.5%.

The Dow industrials’ biggest winners included Visa (V), Home Depot (HD), UnitedHealth (UNH) and McDonald’s (MCD). They are among 13 of the 30 components that coasted ahead 1 point or more.

Look For Relative Strength

Visa, the credit and debit card transactions giant, reported strong earnings of $1.11 a share in the March-ended fiscal second quarter. That beat the Thomson Reuters consensus estimate by 9 cents. Revenue accelerated 13% to $5.07 billion.

As seen in an IBD daily chart, the blue-colored relative strength line of Visa is jetting into new high ground. A rising RS line, which is separate from IBD’s Relative Price Strength Rating, means a stock is outperforming the S&P 500.

Visa took out an aggressive entry point at 125.54 as well as a 126.98 standard entry within a nearly 12-week flat base.

Watch This Industry Group Too

Chipotle Mexican Grill (CMG) and Domino’s Pizza (DPZ) led the market upside. Chipotle soared 24% in big volume and took a big step in building a new base that serves as a bottoming base. The burrito and taco chain is now just 15% below a 52-week high of 499.

Domino’s gapped up and rose 7% to 250.61 in nearly double average turnover on better than expected results.

Four names within IBD’s restaurant industry group show a Composite Rating of 90 or higher, including Texas Roadhouse (TXRH) and Darden Restaurants (DRI), operator of the Olive Garden, Longhorn and Capital Grille chains.

Chipotle, which recently hired a new CEO, notched a 33% pickup in adjusted Q1 earnings to $2.13 a share as sales were 7% higher.

Domino’s stretched its rally past a large double bottom base, with a 211.85 buy point, to nearly 19% after the global pizza chain notched a 59% rise in Q1 earnings to $2 a share. After-tax margin bulged 130 basis points higher to 11.3%.

Sales jumped 26% to $785.4 million, the strongest year-over-year gain in more than five years. Domino’s had grown sales 16%, 15%, 14% and 9% vs. year-ago levels in the prior four quarters.

Energy Stocks Rising, Basing

Royal Dutch Shell (RDSA) slipped more than 1% to 70.24 but the decline is creating little damage to the integrated oil and gas giant’s recent work on a new cup pattern. The global oil and gas firm reported a 40% gain in Q1 profit to $1.27 a share on a 24% increase in revenue to $89.24 billion.

Marathon Oil (MRO), Cheniere Energy (LNG) and EOG Resources (EOG) are also forming new bases. Cheniere is close to surpassing a 59.15 buy point from a handle.

Marathon is within arm’s length of pushing past an 18.76 entry in a three-month cup with handle. The 27% correction within the base falls within the normal range.

U.S. oil near-term futures edged up 0.3% to $68.24 a barrel.

The Advance Shows FAANGS

Facebook(FB) was the best FAANG (Facebook, Amazon, Apple, Netflix and [Alphabet-owned] Google) stock Thursday, soaring 9% to 174.15 and leaping back above the 50-day and 200-day moving averages. The stock is building a new base, which could set up a fresh breakout to new highs and significant price gains for investors seeking to perfect their market timing.

Institutions are rushing back into the megacap internet content play after the Menlo Park, Calif., firm posted strong earnings (up 63% to $1.69 a share) and revenue (up 49% to $11.97 billion) growth after the close on Wednesday.

The social media network’s after-tax margin leaped 360 basis points to 41.7%, likely the highest for any first quarter since the company went public in May 2012.

What To Do About Facebook Now

Those who wish to buy Facebook shares at the right time may want to first see if it can hold the bullish price gap created Thursday. Facebook’s intraday low of 170.80 is above the previous session’s high of 161.06, thus producing the bullish price gap.

On March 19 and 20, Facebook shares dropped hard, taking out the Feb. 9 near-term low of 167.18. A few weeks later, the stock got as low as 149.02. This big undercut of the first low means that a double bottom base could be in the works. If that’s the case, the emerging buy point would be 10 cents above the middle peak in between the first and second low, or 186.20.

Buy Alphabet? Or Watch For Now?

Alphabet (GOOGL) was initially up the least among the five FAANG stocks, just 0.4% at the start, but are now outperforming the Nasdaq, up 2.4%. Netflix (NFLX) powered up more than 2.6% as shares are finding bullish support near its fast-rising 50-day moving average.

Netflix is a member of IBD Leaderboard.

In IBD Stock Checkup, Alphabet scores an 83 Composite Rating on a scale of 1 to 99, with 99 the best possible. The Google search engine owner has become a laggard with a small loss since Jan. 1. Earlier this week, Alphabet posted a 28% rise in Q1 earnings to $9.93 a share, matching the 28% increase in Q4.

(Please follow Saito-Chung on Twitter at @IBD_DChung for more commentary on breakouts, growth companies, stocks making significant price moves, and financial markets.)


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Originally posted 2019-09-19 23:13:36.


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