Chinese internet and top-rated medical plays showed strength amid a dull showing by major indexes in late-afternoon trading Monday. Meanwhile, the Nasdaq composite gained more upside in the final half hour of trading, rising 0.5%, and Apple (AAPL) looked poised to post a sixth straight session on the north side of the 50-day moving average.
XAutoplay: On | Off The action by Apple is critical, not only to the stock but the greater market, given Apple’s heft. The iPhone and iPad giant has a market cap of $790 billion. And the recent action represents an opportunity to buy shares near 149 as the stock stages its second follow-on entry point after breaking out of a bottoming-base pattern Jan. 6-9 at 118.12.
The first follow-on entry came in late March as Apple surpassed a 3-weeks-tight pattern at 141.12, justifying the addition of a small number of shares to an already profitable core position in the stock.
The 118.12 entry comes from adding 10 cents to the handle’s high in a cup-with-handle base that formed from Oct. 11 through Jan. 5 of this year. After the Jan. 6-9 breakout, Apple has gained as much as 32.5%, triggering a key IBD rule to sell at least a partial position of shares when the gain hits 20% to 25%.
Apple, featured in IBD’s Stock Market Today column last week as it retook the 50-day line, gained 1.4% to 152.32, helping the Nasdaq composite edge more than 0.4% higher. The Nasdaq 100 rose 0.3% and tacked on a new all-time high.
The S&P 500 is up fractionally and is trying to avoid a third straight decline, giving up a trifling 0.1% over that time frame. The Dow Jones industrials slipped less than 0.2%, hurt by losses of 1 point or more in at least four of the 30 components, including Home Depot (HD) (falling further below the 50-day moving average, a sell signal for recent new holders), Johnson & Johnson (JNJ) (down 1.7% to 133.01, but holding above the 50-day line and up 3.5% from a 128.47 cup-with-handle buy point) and Goldman Sachs (GS) (building a new potential saucer pattern, still up significantly from an October breakout past 172.52).
The Russell 2000 eked out a small gain, up nearly 0.2%. Volume is running a touch lower on the Nasdaq and sharply slower on the NYSE vs. the same time in the prior session.
Chinese consumer and e-commerce plays continued to surge, even as the Hong Kong and mainland China equity markets were closed for a holiday.
Baidu (BIDU)’s breakout past a 193.84 buy point is gaining more momentum as the stock rallied nearly 3% to 198.72. Volume is running more than 40% higher than normal. Read more about the Chinese search engine’s chart action and other market leaders in IBD’s New Highs feature.
The permissible buy zone for Baidu goes up to 203.53, 5% past the 193.84 handle entry.
Baozun (BZUN) has emerged as a runaway small-cap winner. On Monday, shares gapped up more than 5%, to 34.10, in fast turnover and are now up more than 92% since clearing a long cup-with-handle base at 17.68 on May 5.
Notice on a daily chart how the stock saw volume zoom 143% above its 50-day average on the May 5 breakout day. At the time, volume traded on average 678,000 shares each day.
Baozun’s expertise lies in helping multinational brands such as Nike (NKE) succeed in their marketing campaigns in China. In 2016, earnings jumped 154% to 33 cents a share on a 23% jump in sales to $504 million.
IBD’s TAKE: Baozun was featured earlier this year in The New America. The New America index, as seen in the Market Indexes table on page B6 of the latest IBD Weekly print edition, is up 26% since Jan. 1, pummeling the major indexes. See what other companies have qualified for this proprietary IBD screen for hot growth companies.
Celgene (CELG), Abiomed (ABMD) and Bioverativ (BIVV) are also acting well. Abiomed, a heart pump innovator, is close to breaking out of a narrow flat-base pattern at 147.55. Eight stocks in the IBD 50 are tied to the medical sector.
Abiomed, up nearly 2% to 147, is expected to grow full-year earnings per share by 48% to $1.84 in FY 2018 (ending in March next year) and 41% in FY 2019.
In other financial markets, WTI crude oil futures rose 1.2% to $46.33 a barrel as the U.S. dollar has shown weakness in recent weeks. The dollar is currently worth 111.13 yen but appeared to be testing buying support near 110, a level last seen in mid-June. The yield on the benchmark U.S. 10-year Treasury bond dipped 2 basis points to 2.25%, down from 2.45% at the beginning of the year.