Stocks kept to a bullish script Wednesday with the major indexes edging higher and posting new all-time highs in afternoon trading. Apple ( AAPL ), one of the best-performing megacap stocks this year, continued to trade quietly after bouncing off last week's low of 149.16.
[ibd-display-video id=2326939 width=50 float=left autostart=true]At 153.52, down less than 0.8%, Apple is still below its 50-day moving average and a few points below an Aug. 2 breakout point at 156.75 from a second-stage flat-base pattern.
Continued sideways movement would boost the prospects of a new base forming next to the prior flat base.
Apple has already risen as much as 42% since Jan. 1 and is holding on to a 29% advance since it broke out of a first-stage bottoming-base pattern on Jan. 6-9. That first-stage base was a cup with handle that offered a prime buy point at 118.12, 10 cents above the handle's intraday high.
The Nasdaq composite was off less than 0.1% while the S&P 500 and Dow Jones industrial average harbored gains of nearly 0.1%. Volume was running lighter on both exchanges as of 2 p.m. ET vs. the same time on Tuesday.
The S&P SmallCap 600 slipped 0.3%.
Shopify ( SHOP ) got rocked by sellers following negative comments from short selling-focused research firm Citron, falling more than 10% to 104.86. Volume was heavy at nearly 14 million shares, well above the stock's 50-day average volume of 1.7 million shares.
Certainly, gains have been tremendous since the expert in cloud-based e-commerce platforms for small and medium businesses broke out of a six-week flat base at 45.55 in early January. Gains have grown to as much as 172%. If the stock sharply undercuts the 50-day moving average and fails to rebound, such action would constitute a sell signal for holders who wish to book some profits.
A stock that, after making a tremendous price run, falls sharply in the heaviest turnover since the breakout also is showing a change in character that warrants at least some selling to lock in gains.
However, the move on Wednesday is not triggering any short-selling signals.
IBD's research, as encapsulated by the monthly Short Side column , has found that the best time to sell a former big winner is when the stock has either formed a head and shoulders pattern, or failed miserably following the breakout from a late-stage base.
Shopify fits neither of these profiles.
In a head and shoulders pattern, a stock will fall deeply from its 52-week or all-time high, then make two or three attempts to rally back above the 50-day or 10-week moving average. Such rebounds reflect the existence of some investors who still are bullish in the stock. But after these rallies falter, a drop through the 50-day line in heavy volume would signal the correct time to sell short. The overall pattern typically lasts five to seven months.
Also notice how Shopify has tested its 50-day moving average several times in recent months. Watch to see this week if the stock can finish above either its 50-day line or the 10-week moving average, as seen in a weekly chart .
Returning to Apple, while the media has reported concern over the initial uptake of the latest generation of iPhones, the company's biggest revenue generator today, Wall Street has actually raised its full-year profit forecasts.
Analysts polled by Thomson Reuters now see earnings rising 8% to $9.01 a share in fiscal 2017, which ended in September, and accelerating 22% higher to $11.03 a share in FY 2018.
The company says it is on track to double its services-related revenue by 2020.
IBD's TAKE:Apple is not the only company in big-cap-land that is showing excellent gains this year. Use IBD Big Cap 20 to bulk up your knowledge of highly rated large-cap firms in terms of fundamentals, technicals and quality of institutional sponsorship. In the IBD Weekly, each mini weekly chart on the Big Cap 20, as well as the IBD 50, carries a succinct analysis of what the stock is actually doing today and where the key buy and sell points are.
Other key leaders to watch:
Square ( SQ ), up a seventh straight day as shares in the digital payments platform rose another 0.9% to 30.21 and got further extended past a 28.07 buy point in a cuplike base.
Square was briefly featured in IBD Leaderboard last month.
The proper buy zone goes up to 29.47, 5% past the 28.07 proper entry. The recent new base features a shallow decline of just 13.4%, meaning that it also fits the depth parameter of a flat base , one of the most important chart patterns that are highly useful for growth investors.
Square, whose products and data analytics are popular among mobile businesses and brick-and-mortar retail stores, has notched a profit for five straight quarters amid revenue gains of 41%, 32%, 21%, 22% and 26% over the same time frame.
The Street sees profit surging 500% to 24 cents a share this year and another 79% to 43 cents in 2018.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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