Stocks maintained a bullish path, with large-cap techs helping propel the Nasdaq composite to a gain of 0.6% in afternoon trading Thursday.
XAutoplay: On | OffApple (AAPL) rose nearly 1% to 154.83, climbing within less than 2% of reclaiming its 156.75 buy point in an 11-week flat base. Alphabet (GOOGL) continued to etch the right side of a new 2-1/2-month base following a failed breakout from a flawed double bottom.
The parent company of Google and investor in self-driving and artificial intelligence (AI) technologies gained nearly 2% to 984.15, just 2% off the base’s left-side high of 1,006.19.
Alphabet went public in 2004. The search giant has made an impressive long-term climb since breaking out of an early-stage cup with handle at 372.60 in January 2013.
The S&P 500 gained 0.5% and the Dow Jones industrials rose nearly that amount. Volume fell vs. the same time on Wednesday on the Nasdaq and was roughly even on the NYSE. Breadth is positive, with winners topping losers by a 2-to-1 margin on the NYSE and roughly 9-to-5 on the Nasdaq.
The Street expects Costco, which was originally San Diego-based Price Club, to increase earnings in the August-ended fiscal fourth quarter by 14% to $2.02 a share. That would mark the biggest EPS increase in 10 quarters.
Domino’s, slated to report Q3 results next week, is working on the right side of a new cup that for now shows a 221.68 entry. Earnings are expected to rise 27% to $1.22 a share, slower than gains of 43%, 29%, 42% and 35% in the prior four quarters but still a very respectable increase.
Back to Apple, shares may be rising on news that Apple issuing a software update to fix cellular connectivity issues with its next-generation Apple Watch.
The company’s relentless pursuit of innovation and broadening of revenue streams have given confidence in Wall Street analysts to boost their EPS estimates. Profit is seen rising 12% in the September-ended fiscal fourth quarter, capping a potential 8% EPS gain for all of fiscal 2017, then accelerating 23% to $11.04 a share in fiscal 2018.
The stock’s RS Rating has dipped in recent weeks to 79, down from as high as 90.
On the downside, Shopify (SHOP) sank sharply for a second straight session, but bounced sharply off its intraday low of 93.31. Shares were off 2% at 101.19 in swelling volume. The stock is now 18% below an all-time high of 123.94, which is a normal correction following a tremendous price run from Shopify’s initial breakout in July 2016 at 32.49. Back then, the e-commerce platform software expert built a two-month cup-type base that was part of a long, deep base.
For those with a big gain in the stock, watch to see how the stock finishes for the week. If it is able to close near or above the 10-week moving average, it would indicate institutional support for the stock.
Shopify counts 458 mutual and hedge funds owning shares as of the third quarter, up from 313 at the end of the fourth quarter in 2016. A total 169 funds took new positions in the stock while 90 added to existing positions, according to data from William O’Neil + Co.
Shopify also has several highly regarded mutual funds with big positions, including T. Rowe Price New Horizons, Fidelity OTC Portfolio, and Fidelity Contrafund. But all three reduced their stakes in the third quarter.
On Aug. 1, Shopify broke out of a new base with a 100.90 buy point, but the base was third stage and the stock immediately dived back into the belly of the base. In the process, it also triggered the golden rule of selling.
IBD’s TAKE: In late August, Shopify rebounded strong enough to rally back above the buy point, but the action has illustrated the importance of knowing how the base count can affect the stock’s behavior. Read this Investor’s Corner on counting bases to learn how to gauge future activity in a stock leader.