Nasdaq Slides 9 Dow Stocks Lose 1 Point Or More; 3 Reasons To Hold Apple

Investors acknowledged the threat of a nuclear showdown in East Asia has reached higher prospects than ever before, leading to a broad sell-off in U.S. equities that deepened in the final hour.

The major indexes are still holding toward session lows with an hour remaining in the session. Volume is climbing on both main exchanges vs. the same time Wednesday.

XAutoplay: On | OffMeanwhile, Apple (AAPL) dropped 3.1% to 155.95, helping push the Nasdaq composite down 2% and new session lows. Shares are likely to snap a four-day winning streak, and the modest gain from a new flat-base breakout at 156.75 is now minimal.

However, it's common for many of the market leaders to briefly test a recent buy point from a solid base structure (such as a cup with handle, flat base, double bottom, or saucer pattern). So, despite Apple's relatively big drop, the decline by itself is not a sell signal. Volume is so far running 24% above typical levels.

Another reason to hold Apple? The stock has not come even close to threatening to fill the upward price gap created on Aug. 2 after the iPhone, iPad and digital services titan reported another quarter of improving sales (up 7% to $45.4 billion) and earnings per share (up 18% to $1.67 a share).

Amid the equities pullback, more money appeared to flow into hard assets. Gold futures on the Comex rose 0.8% and reached $1,290 a troy ounce, breaching that level for the first time since June 9. Gold is now up 12% year to date, ahead of the S&P 500's 9.7% gain.

The S&P 500 fell 1.3%, while the Dow Jones industrial average lost 0.8%. At least nine of the Dow's 30 components, including Apple, Goldman Sachs (GS) and Visa (V), have now fallen 1 point or more.

The small-cap S&P 600 fell almost 1.3%, returning near session lows.

A third reason to hold Apple lies in the fact that when analyzing the chart action of top-performing stocks, watch to see if the stock respects its short-term 10-day moving average. In the case of Apple, the stock is still modestly above the 10-day line, currently near 155.46. IBD research finds that a stock that breaks out and stays above this short-term support level has a better-than-average chance of staging a solid post-breakout gain.

Apple also remains 33% above a breakout at 118.12 from an excellent cup-with-handle base that formed from mid-October last year to early January. The big-cap tech broke out of that base, part of a long bottoming base pattern, on Jan. 6-9. The buy point comes from adding 10 cents to that base's highest price in the handle, or 118.02.

As seen in IBD Stock Checkup, the Relative Price Strength Rating of 89 shows improving relative price performance by Apple shares over the past 12 months. Apple's Composite Rating also rose to 95, the best in more than a year.

In the IBD 50, just two names within the first 25 showed a significant gain or bounced well off intraday lows: YY (YY) (down slightly but at 77.84, up 26% from a recent 61.62 entry) and Autohome (ATHM) (up more than 3% to 56.49 in heavy volume and rising 56% past a 36.11 cup-base entry). Both are Chinese consumer spending plays. The latter specializes in car information.

Autohome, which cleared its eight-week cup base in huge volume during the week ended May 12, has grown its earnings per share by 39%, 13%, 9%, 28%, 15% and 39% vs. year-ago levels in the past six quarters. Revenue rose 68%, 49%, 56%, 74%, 16% and 11%.

Elsewhere in the stock market today, Snap (SNAP) is trying to hold on to recent gains after hitting as low as 11.91 last week, then reversing. Shares in the Snapchat social media network firm are still 54% below an all-time peak of 29.44. Snap debuted at 17 a share on March 2.

Snap reports Q2 results after the close. The Street sees a net loss of 15 cents a share despite revenue rising 159% to $186.2 million.

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