Nasdaq Leads Drop; Why GE Is Not A Buy Yet; Sell Apple Or Hold?

X U.S. stocks got a small boost of buying in the final 15 minutes of Monday's session to cut their losses. The Dow Jones industrial average is still keeping losses small in the face of another sell-off in tech component Apple (AAPL), which ended the day down 2.5% to 145.32.

Apple hit an intraday low of 142.51, good for a seven week low, but still has a year-to-date gain of 25.4%.

One reason for the Dow's limited decline on Monday? A 3.6% gain for General Electric (GE) to 28.94 in quadruple normal volume, following news that longtime CEO Jeff Immelt is stepping down. His successor, John Flannery, comes from the same GE health care division that Immelt had commanded prior to taking the CEO role in September 2001.

The Dow Jones industrial average edged less than 0.2% lower, nearly matching the 0.1% decline of the S&P 500, while the Nasdaq composite cut an early 1.6% drop to 0.5%. The tech-filled composite sank 1.6% in heavy turnover last week, but for now the Nasdaq remains above the key 10-week moving average.

The Nasdaq composite had last closed the week below the 10-week line in mid-April.

Volume fell sharply vs. Friday on the Nasdaq and just mildly so on the NYSE, according to early data.

In the stock market today, some industry groups that fell the most last week also struggled. They include the enterprise software group, down 0.8% after sliding 7.7% last week, movies (down 1.5% after losing 4.9% last week), internet content (down 0.9% after losing 4.2% last week) and semiconductor equipment, which slumped 2.5% after falling 3.9% last week.

On the upside, leading industry groups Monday include oil drilling, automobile retailing, long-term medical care, hospitals, ship transport and gaming, all of which advanced 1.2% or more.

GE shares enjoyed their largest gain of the year and the gap up in price is coming in surging turnover. However, the gain does not mean that GE is an instant buy, according to CAN SLIM rules on buying and selling top stocks. For starters, GE is still locked in a downtrend since peaking at 32.38 recently.

Secondly, the stock has been living below its 200-day moving average for nearly five months. Leading stocks tend to trade above both their 50- and 200-day lines before they finish completing a sound base and break out to new highs.

GE is still 52% below its August 2000 all-time high of 60.50 despite new highs posted this year by the Dow industrials. GE's annualized dividend yield is 3.4%.

Apple cut a good chunk of Monday's sharp losses in fast trading after the Japanese investment bank Mizuho Securities cut its rating to neutral from buy on mainly valuation concerns.

It is certainly sensible for shareholders who bought at the Jan. 6-9 breakout at 118.12 in an early-stage cup-with-handle base to lock in at least some gains, given that Apple has already risen more than 32% past that proper entry to as high as 156.65. The mega-cap tech has also sharply undercut the 50-day moving average, a good sign that a serious correction may be due.

However, for those with strong conviction in the iPhone maker, investors could also wait to see if the stock can stabilize and rebound back near or even above this critical support level. At 145.32, Apple is trading just 2.5% below its 10-week line near 149.

Apple is on track to continue growing its earnings and sales, with fiscal Q3 profit seen rising 11% and matching its 11% increase in Q2. Plus, Apple's 1.7% dividend yield is attracting dividend-hungry investors. The stock's long-term payout growth rate is now at 25%, according to calculations by William O'Neil + Co.

Apple currently gets a strong Composite Rating of 90 compared with a weak 31 for GE as seen in IBD Stock Checkup. At the start of January, Apple's Composite was a 51, reflecting its turnaround situation.

In the IBD 50, a few top-ranked firms swooned early yet appeared to rebound on solid demand from fund managers. However, as noted in the chart analysis found in the bottom of each mini-chart in the IBD Weekly print edition in recent weeks, it makes sense to sell into strength and pocket at least partial gains, especially when your gain from a breakout has surpassed 20% to 25% or even more.

Veeva Systems (VEEV) hit an intraday low of 56.94, off more than 7%, before the specialist in business software for pharmaceutical and biotech companies cut the loss to 2.7% to 60.01. That's still a sharp loss, but the stock is holding firmly above its 50-day moving average for now. On March 13, Veeva broke out past a 45.95 early buy point in a tightly wound 14-week base.

Veeva is forecast by Thomson Reuters to increase its earnings by 14% to 83 cents in fiscal 2018 (ending in January next year) and 19% in FY 2019. The Pleasanton, Calif., firm has a top-notch 99 Composite Rating and a 96 for Relative Price Strength.

Dave & Buster's (PLAY) and Chinese private school operators New Oriental Education (EDU) and TAL Education (TAL) are also showing unusual strength. The latter two exemplify the positive action seen among many foreign-based companies that have earned a spot in the current IBD 50.

Cognex (CGNX) slid more than 4% to 89.85 and at one point undercut its 50-day moving average near 88. The machine vision expert for semiconductor and factory automation systems has already climbed more than 82% from a mid-November breakout past a base entry at 53.55.

While earnings growth has been red hot lately (up 81%, 75% and 91% in the past three quarters), Cognex's earnings are expected to rise just 6% to 55 cents a share in the second quarter of this year. A big deceleration in EPS growth can serve as a warning to look for key sell signals, including the biggest single-day point drop in heavy volume, new highs in low turnover, and a severe break of a trend line.

RELATED:

Is Apple Near A New Buy Zone?

The Income Investor: 3 Mortgage Investors With Yields Surpassing 7%

Where Is The Market Going From Here? Read The Big Picture

IBD Tech Coverage: Apple Plays Catch Up With Its HomePod