Key indexes remained near the breakeven point Thursday afternoon after the first set of top-tier banks Citigroup (C) and JPMorgan Chase (JPM) reported decent third-quarter results, officially kicking off Q3 earnings season.
XAutoplay: On | OffBoth Citi and JPMorgan fell in heavy turnover, but are not triggering any sell signals.
Apple is trying to stretch its win streak to four sessions and got as high as 157.37. Investors with conviction or a big cushion of gains in the stock may purchase shares, but volume is largely absent. Another strategy would be to wait for the iPhone giant to climb back above the 50-day moving average, currently near 158, or wait even longer and see if it can form a new base.
The Nasdaq composite edged less than 0.1% higher and marked a new all-time high of 6613.50. The Nasdaq 100-tracking Powershares QQQ Trust ETF (QQQ) also inched less than 0.1% higher. The S&P 500 and the Dow Jones industrial average were virtually flat.
Volume was running higher vs. the same time Wednesday on both main exchanges.
Apple had rallied a little more than 5% after clearing its 11-week flat base on Aug. 2 following its best EPS growth in nearly a year. The pullback to below the 156.75 entry and drop below the 50-day moving average reflected a sobering of investors’ minds after the company unveiled its iPhone 8 and X models.
However, such drops back to a proper buy point are not unusual, even among big market winners. IBD has noted in the past that as many as four out of 10 true leaders will backtrack to or near the buy point in a proper base, shaking out weak holders, before resuming its rally.
Plus, Apple did not trigger the golden rule of selling.
Apple has gained more than 39% since its Jan. 6-9 breakout from a first-stage cup with handle.
Snap, however, did trigger the golden rule after it tried to rally back following a fireworks-like debut on the NYSE and a spectacular 34% free-fall in two weeks’ time in March. Those who tried to buy later that month broke a key IBD rule, which is to never buy a stock before its base fully forms.
While the rebound from an 18.90 low on March 17 to as high as 24.40 six sessions later was impressive, Snap was still in basing mode. Those who bought on the way up were forced to cut their losses at 8% or less.
Now, shares in the money-losing social media network are trying to fashion an authentic first-stage base following a 62% slide from its all-time high of 29.44.
Snap has lost money every year since 2015 despite showing excellent top-line growth. Shares are rising amid bullish comments made by Credit Suisse. Morgan Stanley is Snap’s chief investment banker.
Defense firms continue to rally amid an ongoing threat of military conflict between North Korea and the U.S. Lockheed Martin (LMT) rose 0.7% to 320.95 to mark its 10th straight gain. The F-35 fighter jet maker is up nearly 19% after rising past a 269.84 flat-base entry in mid-March.
Lockheed’s earnings per share have climbed 49%, 24%, 8% and 12% vs. year-ago levels over the past four quarters amid revenue increases of 15%, 19%, 7% and 10%.
Are there other relatively young IPOs (going public in the past five years or later) that are making money and doing well in the market today? Sure.
Square (SQ), Five Below (FIVE), Ollie’s Bargain Outlet (OLLI), eBay spin-off PayPal (PYPL), YY (YY), Jupai (JP) and others are just some examples. Most of these inhabit the IBD 50. Watch for follow-on entry points or new bases to develop.
IBD’S TAKE: Did you know that the flat base, which reflects an unwillingness among large fund managers to dump their shares, often serves as a launchpad for big breakouts and tremendous price gains for many growth stocks? Learn the elements of this bullish pattern via this Investor’s Corner column and add it to your knowledge of charts so you can have an edge on Wall Street.