Major indexes enjoyed moderate gains but a majority of issues on the Nasdaq did not join the rally in stocks today. Volume rose. Meanwhile, FANG stock Netflix rebounded nicely, but still faces a key test at the 50-day moving average.
Netflix (NFLX) shares rose 2% to mark its third advance in four sessions. The video streaming pioneer helped the Nasdaq composite rally 0.6%, its biggest gain since a 1% lift on Aug. 26. Yet losers topped winners by nearly 200 issues on the Nasdaq.
Netflix is building a brand-new base, which sets up the possibility of a future breakout. When the Los Gatos, Calif., firm broke out on May 23, it cleared a narrow flat base with a 338.92 proper buy point. That move engineered a trip to all-time new highs and 24.9% profit at the peak of 423.20 nearly five weeks later.
FANG Stock Action
Such a gain following a breakout triggered an offense-type IBD sell rule, which is to take at least partial gains at 20% to 25% above a proper buy point. However, Netflix still shows good prospects for robust growth. Analysts surveyed by Thomson Reuters see third-quarter earnings leaping 134% to 68 cents a share on a 34% rise in revenue to $4 billion.
For the fourth quarter, the Street sees a 22% gain in earnings to 50 cents a share and a 29% jump in the top line to $4.24 billion.
The Nasdaq 100 rose more than 0.7%. Both the Nasdaq composite and the 100 are showing buying support near the 10-week moving average, as seen on an IBD weekly chart.
The 10-week moving average is drawn in red in all weekly stock charts at Investors.com and MarketSmith, a more powerful stock charting and screening service. It gives the general trend in price over the past 10 weeks on a weekly closing basis.
Crude Oil Jumps More
The S&P 500 bumped up nearly 0.4% amid a more than 2.7% spike in West Texas Intermediate crude oil prices to $69.39 a barrel. Futures traders have pointed to the U.S. sanctions placed against Iranian oil imports as a key driver of strength in black gold.
The Dow Jones industrial average also rallied 0.4%, but the Russell 2000 lagged, up fractionally. The cost of money climbed. Toy and game, fiber optic telecom gear, automaker, chip manufacturing and truck transport stocks fell hard, sinking 1% or more. Chip equipment, mortgage services and jewelry retail shares also slumped.
The yield on the benchmark 10-year bond jumped by 4 basis points to 2.98%, matching an Aug. 7 high.
Software Stocks Rock, Again
New Relic (NEWR) shot nearly 4% higher to 109.54 and notched a six-week high to 109.54 as volume climbed 20% above its 50-day average. The database software firm joined IBD SwingTrader earlier on Tuesday.
New Relic peaked in July at 114.78 and corrected mildly, falling just 16%. That’s a bit too much of a decline to qualify as a flat base. So, the current action appears to be forming a cup base. That would give a standard buy point of 114.88 for CAN SLIM-style investing.
Enterprise software stocks also jammed today. Please read today’s New Highs column and Sector Leaders story for more detail on names including ServiceNow (NOW).
This Big Cap Leader Breaks Out
Electronic parts giant Amphenol (APH) gained nearly 0.4% to 96.71 in fast turnover. The Big Cap 20 stock is still in buy range after clearing a 96 buy point in a base on base.
The Street sees profit rising 14% this year to $3.61 a share and up 10% in 2019.
The IBD Electronic-Parts industry group ranks a healthy No. 28 out of 197 industry groups for six-month relative price performance as of Monday’s close. Strong industry performance often begets strong individual stock performance.
Major Sell Signal Triggers
On the downside, Funko (FNKO) ended its parabolic ascent, falling almost 18% to 25.58. Volume soared to 4.1 million shares, vs. its float of 6 million.
The 5.47-point drop was Funko’s largest since its breakout from a big cup base with a 10 entry on May 30.
Funko specializes in pop culture-inspired figurines, accessories, apparel and other goods. Sales jumped 21% last year to $516 million. Funko has also posted positive earnings per share of 17 cents, 23 cents, 3 cents and 7 cents in the past four quarters.
The stock debuted on the Nasdaq at $12 a share in November 2017.
