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Stocks Cut Losses; Will Dow Jones Component Apple Break Out? | Stock News & Stock Market Analysis

Stocks took a well-deserved break in afternoon trading Wednesday, yet the major indexes held losses modest in afternoon trading. Meanwhile, Apple (AAPL) continued to show market-leading action as shares move sideways after an Oct. 27 breakout.

XApple, one of the big-cap leaders of 2017, is down roughly 1% for the week following a 3.4% lift in the first trading week of 2018.

Yet more importantly, the mega-cap iPhone, iPad and digital services play has held nicely above a 160.97 buy point in a good cup with handle that the stock formed from early September to late October. A strong rebound off the 10-week moving average, currently near 172, offers a chance for buyers at the earlier buy point to add a small amount of shares to a winning position.

Apple gained as much as 10% past the key 160.97 cup-with-handle entry.

The Nasdaq composite was off around 0.3% as sellers dominated among chipmaking and semiconductor equipment stocks. Lam Research (LRCX), a former IBD Big Cap 20 stock and big winner in 2017, fell more than 2% to 192.12 in fast turnover after trying to climb back above the key 50-day moving average on Monday. Despite a two-day drop, the expert in silicon wafer etching systems is clearly forming a new base.

The S&P 500 was down slightly, as solid gains in airline, bank, department store, steel, metal ores, movie and gaming shares helped limit the downside.

The Dow Jones industrial average was virtually flat, helped by strength in General Electric (GE) and JPMorgan (JPM). Results from JPMorgan are due Friday before the open.

Besides Apple, the only other component in the Dow down 1 point or more is UnitedHealth (UNH). The managed care giant has carved a shallow five-week flat base that shows a 231.87 buy point.

UnitedHealth, which garners a $216 billion market value, initially broke out all the way back in September 2010, clearing a 33.89 buy point in a saucer with handle. It created new bases along the way, providing additional correct entry points in the stock.

Elsewhere in other financial market, the rush out of U.S. government bonds got a boost on reports that China, a heavy buyer of Treasury securities, is mulling fewer purchases in the future. That actually is not new news, but the Bloomberg report still appeared to weigh on bond prices.

Back to Apple, fiscal first-quarter results are due Feb. 1 after the close.

Apple had a glorious first quarter in the market last year. On Jan. 6, the stock broke out ahead of quarterly results when it cleared a 118.12 buy point in a bottoming base and first-stage cup with handle. A few weeks later, Apple soared on better than expected results. That report led to a sustained turnaround in fundamentals.

The gain from that initial 118.12 entry point has so far reached 50%.

Wall Street expects the growth in the top and bottom lines to continue. This boosts the prospects of further capital appreciation this year.

Analysts polled by Thomson Reuters see earnings rising 12% vs. a year ago to $3.77 in the October-to-December quarter on a 10% lift in revenue to $86.17 billion.

In fiscal Q2, expect growth to accelerate. Earnings may rise 39% to $2.92 a share on a 30% jump in revenue to $68.75 billion.

Institutions savor the shares of companies that can accelerate their growth.

Apple gets a positive Accumulation/Distribution Rating of B- on IBD Stock Checkup, while the RS Rating is good at 83.

The yield on the benchmark U.S. Treasury 10-year bond rose to 2.58%, roughly 60 basis points above the 2-year note and 115 basis points above 3-month Treasury bill yields.

Dividend-heavy utilities continue to sell off. Dominion Energy (D) dropped more than 1% to 76.07 in volume running 59% above average. A few weeks ago, the stock took out its 50-day moving average in heavy volume, a sell signal for most stocks.

Be wary of buying high-yield stocks on the way down; it’s no different from catching a falling knife among high-octane issues.

Crude oil continues to climb, as WTI near-term futures ramped up 0.5% to $63.29 a barrel. In addition to constrained supply amid stricter production quotas being enforced by OPEC and Russia and low U.S. crude inventories, other factors for the rise may have to do with the fact that cash coming out of debt securities needs to find a new home.

Bitcoin Investment Trust (GBTC) fell nearly 4% to 2,080 in dull turnover as its base building work continues. It lies 40% off a 3,522 all-time peak.

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