Nasdaq Sinks Into Red But Chips Firm; This Top Small Cap IPO Hits New Follow-On Buy Point – Investor's Business Daily

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Stocks rose early on Tuesday but the Nasdaq surrendered moderate gains to fall mildly. The Nasdaq composite, up more than 0.6% during the first hour of trading, slumped 0.5% right before lunchtime in New York. The Dow Jones industrial average, up as much as 0.7% after the open, edged slightly lower.

X Alphabet (GOOGL) helped lead the pullback, falling more than 1% to 1,153. The Google site operator and pioneer in self-driving technology is forming a new base after selling off hard in early February. The megacap internet content firm limited its decline to 17% from a 1,197 peak as shares found support at the 200-day moving average.

Meanwhile, semiconductor shares also cooled but still show high relative strength.

ASML (ASML) was off around 0.2% but at 210.95 the Dutch chip equipment giant still held above a 208.68 buy point in a three-month base on base, one of the most powerful chart patterns that top growth stocks form before breaking out to new highs and strong price advances.

ASML has grown its earnings per share by 25%, 74%, 115%, 34%, 46% and 39% vs. year-ago levels in the past six quarters on revenue gains of 17% to 53%. As seen in IBD Stock Checkup, the megacap member of IBD’s semiconductor equipment firm gets a solid but not great EPS Rating of 88. Q1 profit is seen rising just 1% to $1.13 a share, burdened by a very big gain (115%) in the year-ago quarter.

At the market get-go, investors applauded the arrival of tamer U.S. consumer price increases in the U.S. and looked past the sudden termination of President Trump’s Secretary Of State, Rex Tillerson.

The CPI index and the core index both showed a 0.2% rise in February, down from much bigger month-to-month gains in January.

Within the 30-stock Dow Jones industrial average, just three names rose 1 point or more, including UnitedHealth (UNH), McDonald’s (MCD) and Johnson & Johnson (JNJ).

General Electric (GE) marked the Dow industrials’ index’s low end, down more than 3%. JPMorgan Chase reportedly cast doubt on the viability of GE’s already reduced cash dividend. The industrial powerhouse is slated to pay shareholders 12 cents a share on April 25 to holders of record Feb. 26. That gives GE an annualized yield of 3.3%, vs. 1.8% for the S&P 500.

GE holds a 3 Relative Price Strength Rating on a scale of 1 to 99, meaning it’s outperformed just 3% of all companies in IBD’s database over the past 12 months.

The large-cap S&P 500 let gains of 0.4% slip to a 0.1% loss near lunchtime on Wall Street after finishing 0.1% lower on Monday. Yet the 500 continues to create a solid cushion above its 50-day moving average, a healthy sign for stocks. The Nasdaq composite, up 0.4% on Monday, hit new highs again with another 0.4% jump. The Nasdaq is aiming for an eighth straight advance.

As noted in IBD’s The Big Picture column, on Friday the Nasdaq spurted into new high ground, ending a six-session phase in which the market uptrend was under pressure. The current outlook is now back to “Confirmed uptrend,” which means that investors can actively search out breakouts in big volume by companies with high-quality fundamentals.

The S&P SmallCap 600 edged 0.3% higher early before sliding to a 0.1% loss. At 972, the index is up 3.8% year to date.

Among small caps, Canada Goose (GOOS) flew back above its key 50-day moving average as shares jumped more than 2% to as high as 33.87, then settled back. It’s the second rebound back above the 50-day moving average, offering a new secondary buy point following an early-November breakout at 22.10.

The seller of ultra-premium outerwear and cold weather apparel has been a stunning stock within the apparel and retail group, tripling in price since its March 16, 2017, IPO at 12.75 a share.

Canada Goose cleared a first-stage cup with handle at 22.10 on Nov. 8, catapulting higher the next session on solid quarterly results (earnings up 32% to 29 cents a share, sales up 35% to $172.3 million). Last month, Canada Goose posted another solid quarter of growth with EPS up 38% and sales up 27%.

The Street sees the small cap firm posting a net loss of 6 cents a share in fiscal Q4 ending in March vs. a net profit of 17 cents in the year-ago period. In the quarter ended June 2017, Canada Goose lost 13 cents a share.

Despite the checkered bottom-line results over the past two years, influenced by the seasonality of its merchandise mix, Canada Goose gets a 95 Composite Rating on a scale of 1 to 99 in IBD Stock Checkup.

Elsewhere in the stock market today, Lumentum (LITE) held on to Monday’s strong gains and then some, rising 0.6% to 72.35. The expert in 3D sensors for smartphones and other optical communications components has cleared a 66.80 early entry point in a deep seven-month base and is 8% past that buy point.

In February, the company reported a big turnaround in earnings, up 193% in the December-ended fiscal second quarter to $1.67 a share, ending a two-quarter slump in profits. Sales leapt 53% to $404.6 million.

In a Feb. 6 IBD technology story, industry analyst and Loup Ventures Managing Partner Gene Munster noted that Lumentum management indicated 3D sensor revenue should more than double in the second half of 2018 over 2017.


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