This Index Matches Dow Jones; 5 Top Stocks Beat FANG

The Russell 2000 engineered a sixth straight up day, rising 1.3% to outperform gains of 0.8% by the S&P 500 and 0.4% by the Nasdaq composite in stocks today. Volume is running mildly higher vs. the same time Thursday afternoon. Crude oil surged again. Gold rose.


At 3:30 p.m. ET, the Dow Jones Industrial Average held most of the day’s gains thanks to at least seven of its 30 components rising 3 points or more. It’s the only major index to outperform the Russell 2000, a popular gauge for small caps. The Dow Jones also all but ensured an eighth straight weekly advance with a 1.4% gain.

Big Wall Street firms and superregionals helped lead the upside. JPMorgan Chase (JPM), still in base-building mode, helped lead the Dow Jones with a 3-point lift to 105.49. It marked the highest levels since Dec. 7, when the general market was still in a “market in correction” phase.

But on Jan. 4, Wall Street flashed a Day 7 follow-through, a key turning point for stocks.

Since then, highly rated companies in the small, mid- and large-cap fields of the market have staged big gains and nice breakouts.

JPMorgan shares likely got a boost on news that Warren Buffett made significant share buys in the money center bank, Bank of America (BAC), Bank of New York Mellon (BK), PNC Financial (PNC) and a couple other financial giants in the fourth quarter of last year.

On Friday, computer networking, generic drug, oil machinery and equipment, U.S. oil and gas exploration, construction and mining gear, plastics, automobile retail, truck and superregional bank stocks paced the advance with gains of 2% or more. Arista Networks (ANET) and Cisco Systems (CSCO) are having a banner week, rising 16% and 5% for the week respectively.

Cisco also staged a new breakout past a 49.24 entry in a base that shows elements of a double bottom. Arista is still basing and retook its long-term 40-week moving average.

The S&P SmallCap 600 gained 1.3%, good for a fifth up day in a row. At 973, the 600 is up 15.2% since Jan. 1, vs. a 10.5% lift by the S&P 500.

Faring Better Than The Dow Jones And FANG Stocks

IBD Leaderboard currently features more than a dozen names that have broken out to new highs or are trading near a proper buy point.

They include Xilinx (XLNX), TransDigm (TDG), Ciena (CIEN), Starbucks (SBUX) and Domino’s Pizza (DPZ).

Once a stock stages a breakout, an investor should not chase the stock once it’s risen more than 5% past the proper entry. The only exception? When a stock makes a breakaway gap in much the same fashion that Xilinx did on Jan. 24.

The average Composite Rating of the five above names is currently 96 on a scale of 1 (the worst) to 99 (the best).

The Composite Rating helps IBD readers pinpoint growth stocks with the strongest potential to become true market leaders. It’s not to be used as a timing indicator for buying or selling. That’s what good stock charts are for.

Why Stock Charts Help Investors

See annotations on the daily and weekly charts of these five names on Leaderboard and how the annotations help any investor learn to buy correctly and sell for maximum gain and minimum downside risk. IBD’s investing strategy employs the 3-1 win-loss ratio in which one’s winners should produce gains that are at least three times the size of losses. Why? This allows an investor to be wrong in stock selection three out of four times, yet still break even or make money.

Xilinx has surged nearly 25% since it staged a breakaway gap and vaulted over a 95.28 buy point in a cup without handle.

The programmable logic chip expert also holds a 39.5% gain year to date, better than all the FANG plays.

Ciena has crafted a rare ascending base.

A Positive Technical Factor In The Stock Market

These names represent a widening breadth of market leadership, a plus for the current bull run. In the fourth quarter, major indexes such as the Nasdaq composite fell more than 20% below their peaks. That triggered the textbook definition of a bear market.

Read more about why the Jan. 4 follow-through was key for growth stock investors, and how IBD portrayed the action in this Jan. 4 Big Picture column.

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


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Originally posted 2019-09-19 23:33:56.


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