The three major indexes shifted back to the upside in afternoon trading Friday as investors continued to weigh the strength of the global economy against threats by North Korea to undermine peace in East Asia.
XAutoplay: On | OffThe Nasdaq composite led with a nearly 0.3% gain. Apple (AAPL), up 1%, is also helping to boost the Dow Jones industrial average (up 0.2%). The S&P 500, hurt by sharp declines in select software, airline, medical services and medical home care stocks, was up less than 0.1%.
Solar, meat products, chip and restaurant stocks led the market’s upside.
Apple continues to reassert its leadership position in the stock market. Shares rose more than 1% to 160, and volume is running much heavier than normal. The expiration of weekly and monthly options may be helping to boost turnover in the No. 1 company in the U.S. exchanges by market cap ($826 billion).
The stock continues to pave a bullish path, rising modestly from a new second-stage flat base with a 156.75 buy point. Apple is still within the 5% permissible buy range, which goes up to 164.59.
Shares are also up 35% from a prior Jan. 6-9 breakout past a first-stage cup-with-handle entry point at 118.12. The stock is getting a boost this year because management is delivering on a promise to reignite growth. In the three quarters through the fiscal fourth quarter of 2016 (ended in September that year), Apple’s sales and earnings had slumped. No more. Earnings per share have risen 2%, 11% and 18% vs. year-ago levels in the past three quarters on top-line increases of 3%, 5% and 7%.
Analysts see fiscal Q4 profit rising 13% to $1.88 a share.
Among 32 analysts polled by Thomson Reuters, the highest EPS estimate is currently $2.01, which would translate to a 20.4% profit gain. That would mark the biggest profit increase in seven quarters and another quarter of growth acceleration — something that institutional investors crave.
A second reason to continue to invest in Apple is the strength of technical action. As seen in a weekly chart, Apple continues to post a series of higher highs and higher lows. It’s continued to trade on the north side of its rising 10-week moving average most of the time.
While the stock’s relative strength line (painted in blue on IBD and MarketSmith charts) has taken a dip lately, other IBD measures of stock strength remain high. The RS Rating is 86, much improved from the mid-50s level at the start of the year. Stock Checkup shows a positive Up/Down Volume ratio of 1.3. A ratio above 1.0 means that volume on the up days in price over the past 50 sessions is heavier than the down days.
Three, Apple has proven it continues to be capable of reinventing itself with new products and services. Last week, CEO Tim Cook unveiled a brand new Apple Watch that now can be used as a phone. The luxury-edition iPhone X, meanwhile, carries a price of $999. While that’s an extraordinary price, it does reflect Apple’s confidence in its product and it also bodes well for gross margins.
The best stocks tend to show the N in IBD’s CAN SLIM investment paradigm, or “New.”
Four, the Composite Rating is still decent at 89, as seen in IBD Stock Checkup, but down from 92 recently. William O’Neil, founder and chairman of IBD, has said that he prefers to invest in stocks that show a 95 Composite Rating or higher at the start of their big price runs. Exceptions can be made with turnaround situations.
Five, the dividend is likely to rise, which boosts an investor’s overall return. The current annualized yield is 1.6%, which is still lower than the 1.9% yield for the S&P 500 for now.
Since May, Apple has paid a quarterly dividend of 63 cents a share, up 34% from the 47 cents a share it paid during the summer of 2014.
IBD’s TAKE: Can you make serious profits in the stock market with an account that has as little as, say, $2,500? Absolutely. Read this new Investor’s Corner column and others in the archive to beef your stockpicking and trading skills. Remember, it’s not the total number of shares bought that matters, it’s the amount of time, effort and concentration in the best stocks.