Retailing, apparel, consumer-spending and semiconductor-related stocks dominated the market’s upside in stocks today, as major indexes sought to beef up their morning gains. Chipotle Mexican Grill (CMG), meanwhile, reaffirmed a new trend of emerging institutional demand within the restaurant industry group.
Chipotle, which is a new trading idea in IBD SwingTrader on Wednesday, rallied more than 3% to 440.27 in healthy turnover for what figures to be its fourth up day in a row.
Chipotle’s volume is running 52% above usual levels, hinting that mutual funds, pensions, hedge funds, banks, insurers and the like are accumulating shares heavily.
The stock ran in the short sellers on April 26 after reporting Q1 results that pointed to an ongoing turnaround in fundamentals. After that big jump, Chipotle traded tightly and volume dried up, forming a handle in the process. That positive action following the catapulting move in price in essence formed a handle and a 433.10 buy point within its new deep first-stage base.
At 2:30 p.m. ET, the Nasdaq composite paced the key indexes with a gain of more than 0.7%. At 7405, the premier index of high-growth companies is now up 7.2% year to date. It advanced 28.2% last year.
The Innovator IBD 50 (FFTY) ETF rallied 1.2% to 35.25. The exchange-traded fund, managed by Innovator Capital, gained 34% in 2017.
The S&P 500 rose 0.5%. A two-point drop by 3M (MMM) hampered the Dow Jones industrial average’s advance. The blue chip index rose around 0.3%. Volume is running around 7%-8% lower vs. the same time Tuesday on both main exchanges.
3M has been hit with heavy institutional selling ever since the Dow Jones industrial component and manufacturing giant cracked below the 50-day moving average in severe volume on Feb. 5, a key sell signal.
Some sector indexes heated up even more.
The PHLX Semiconductor index, also known as the SOX, winged 1.1% higher. Micron Technology (MU) broke out of a new double-bottom base at 54.37 in decent but not great turnover.
Notice how in this nine-week double bottom, the middle peak of 54.27 is actually 10 cents beneath the midpoint of the actual base (45.31 low plus 63.42, giving a base midpoint of 54.37). You’d prefer to see the midpoint of a double bottom be firmly lodged within the upper half of the base.
A New Double Bottom
That said, Micron is still 11% below the base’s 63.42 peak. In other words, it’s possible for the stock to continue building the right side of the current base. Double-bottom bases can also form handles, which represent a final shakeout of uncommitted shareholders, and boost the chances of a successful breakout.
Micron is a member of the strong data storage industry group. In that group, Smart Global (SGH) continues to act as a market leader as well. Shares, up nearly 4% to 47.33, are working on the right side of a potential cup pattern.
The former has made a series of rebounds off the 50-day moving average after it cleared a 33.64 buy point in a 10-week flat base on Nov. 3, 2017. On that day, the chicken wing chain reported a 31% jump in earnings to 17 cents a share for the third quarter of 2017 as sales lifted 19% to $26 million.
Bullish On Burgers
Since then, earnings have risen 13% and 19% in the prior two quarters. In IBD Stock Checkup, Wingstop ranks 5th within the Retail-Restaurants industry group with an 87 Composite Rating. That overall ranking belies a solid EPS Rating of 88 on a scale of 1 to 99, which means that the company’s long- and short-term profit growth is superior to 88% of all publicly traded companies in IBD’s database.
Wingstop’s Composite score is likely hurt by the fact that it doesn’t have an SMR (Sales + Profit Margins + Return on equity) Rating. Why? Wingstop does not have a calculable return on equity. As of the first quarter of 2018, the Dallas-based company showed a total stockholders’ deficit of $146 million. Nonetheless, Wingstop posts excellent operating cash flow that has been higher than annual earnings per share for four years in a row.
The Street sees Wingstop’s earnings rising 14% to 83 cents a share this year and 19% to 99 cents in 2019.
Shake Shack powered past a 44.50 buy point in a four-month cup with handle on April 13, then blasted higher nearly two weeks later after the popular burger, crinkle cut fries, and shake chain posted a 50% bulge in adjusted Q1 profit and a 29% increase in sales to $99.1 million.
Wingstop and Shake Shack are small cap firms with market values of $1.5 billion and $2.2 billion, respectively.
Solar Stocks Still Leading
The expert in making raw polysilicon for solar cell production is a wild stock, easily prone to swinging up or down 5% any given day. Nevertheless, the stock has now cleared a 65.09 entry point in a deep double bottom base and is in buy range.
The 5% buy zone for Daqo goes up to 68.34.
Daqo is No. 13 in the IBD 50.
The yield on the benchmark U.S. Treasury 10-year bond is holding firmly above the 3% threshold, currently at 3.08%.
Fed funds future now show a roughly 54% chance that the Federal Reserve will make four quarter-point hikes in short-term interest rates by December this year.